FanDuel appears, at least publicly, to be bearing the brunt of the failed merger attempt with DraftKings.
FanDuel gives more equity to existing investors
According to a report published by The Herald in Scotland the dissolution of the deal between the two daily fantasy sports companies triggered a clause which gives investors a significant equity boost:
Those who bought into the company in 2014 via a $70 million fundraising led by Los Angeles private equity house Shamrock Capital Advisors – an investment vehicle for the Disney family – have been awarded one new share for every two existing shares they held in the company.
Investors who participated in a $275m fundraising led by private equity giant Kohlberg Kravis Roberts (KKR) in 2015, meanwhile, have been awarded 2.35 new shares for every existing share.
Under FanDuel’s management incentive scheme, there has been a sixtyfold increase in total shares and a corresponding dilution in the rights to them. This distribution increases investors’ ownership in the company from 54 to 71 percent of the 4.4 million total shares, The Herald reported.
Company founders Nigel and Lesley Eccles agreed to the merger-termination clause at the start of this year.
Five board members out
In addition to the extra shares, key investors have also seized a stronger position in the boardroom, according to a follow-up from The Herald. FanDuel’s board of directors has reportedly been halved from 10 members to five, with the founders now holding just one of those seats.
Co-founders Lesley Eccles and Tom Griffiths both gave up their positions. Nigel Eccles retained his, but the founding team now controls just one of five seats (rather than the three of ten they held previously).
Representatives from investors Pentech and NBC Sports Group were also forced to leave the room, along with one of the two members of Shamrock Capital Advisors. The other, Michael LaSalle, retained his position, as did KKR’s representative, Ted Oberwager.
The two remaining seats in the boardroom are occupied by representatives of early investors Piton Capital and Comcast Ventures.
FanDuel has been historically well-funded
FanDuel was the first daily fantasy sports provider to attack the marketplace in full force. Since setting up shop in 2009, it’s pushed through six publicly known funding rounds totaling more than $350 million.
Investors like NBC Sports and Shamrock participated in a $70 million round in September 2014. A subsequent $275 million round in July 2015 provided a huge infusion of funds. Bolstered by the heavyweights at KKR, the round brought Google Capital and Time Warner into the fold for the first time, among others.
But a little more cash would sure be handy right about now
The redistribution of equity is the most recent domino to drop in the wake of the abandoned merger.
In June, the Federal Trade Commission moved to block the planned union between FanDuel and DraftKings. The government watchdog cited anti-trust concerns, claiming that a combined DFS entity would control more than 90 percent of the US market.
After showing up to the dance together and leaving in separate cars, FanDuel and DraftKings have now been forced to seek out new plans for independent, long-term liquidity.
FanDuel confirmed the restructuring of its capital table just days after announcing a withdrawal from the UK marketplace. The company was originally founded in Edinburgh, Scotland, but has since moved its headquarters to New York.
FanDuel’s 2015 funding round was both its largest and its most recent to date. DraftKings raised $300 million right around the same time, and the ensuing advertising war took a toll on the capital reserves of both. Investors for FanDuel had been preparing for another funding round in the near future, according to a report from a month ago.
Meanwhile, DraftKings CEO Jason Robins told Fortune it wouldn’t need to raise funds ahead of the NFL season:
“We don’t need money now. We raised a bunch of money during the merger process,” said Robins, referring to the $100 million in Series E1 round of funding the company raised in March.
