Is PrizePicks Looking To Buy Or Sell After Hiring Investment Bank?


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PrizePicks

PrizePicks, the most downloaded daily fantasy sports app in the US, has hired Moelis & Co. to explore potential mergers and acquisitions.

One of the largest investment banks in the world, Moelis & Co., has facilitated high-profile deals like Sprint’s merger with T-Mobile and MGM Resorts’ sale of the Bellagio Hotel and Casino in Las Vegas.

PrizePicks, however, is not interested in an outright sale, according to a report from Bloomberg, which first broke news of the hiring. An individual with knowledge of the situation confirmed the hiring with LSR.

A spokesperson with PrizePicks declined to comment.

‘Biggest goldmine left for sports betting’

Available to ages 19 and up in 33 states and Washington D.C., PrizePicks boasts one of the largest online gaming userbases in the US.

Of particular popularity is its ‘pick ’em’ product, which an increasing number of states have taken regulatory action against as too similar to sports betting. Most of those states decided it needs regulation as sports betting, a business subject to much higher barriers of entry, taxes, fees and legal scrutiny than fantasy sports.

While fellow pick ’em operators like Betr and Underdog Fantasy are transitioning their fantasy players into bettors on their official sportsbooks in some states, PrizePicks has shown no public interest in becoming a sports betting company.

“It’s not surprising that this is coming out that they’re looking to do something. It just feels like for a while now it’s what’s the ultimate endgame for PrizePicks, some of these if you want to call them grey-market companies in some of these states,” an industry source told LSR. “If you’re looking for an advantage into essentially the biggest goldmine left for sports betting, where would you want to go to, you’re going to want to turn to your DFS product.”

PrizePicks boasts attractive userbase

The company’s userbase is particularly valuable in California and Texas, where sports betting is illegal and pick ’em DFS presents a close alternative. PrizePicks relies much more heavily on those regions than sports betting companies do, despite sharing many of the same markets.

Both states would be crown jewels for companies like DraftKings and FanDuel, who credit much of the competitive advantage they enjoy today in online sports betting to the userbases they amassed in their early days as fantasy sports apps.

“If you’re one of these companies and we know we’re going to get California at some point, does PrizePicks become a more viable acquisition target? Obviously, depending on the price and what they’re asking,” the industry source added. “That’s essentially your goldmine database that at some point will become very valuable to these businesses.”

California investigation still ongoing

PrizePicks and similar fantasy operators could be at risk of losing California, as state Attorney General Rob Bonta is reviewing whether the state’s gambling law prohibits daily fantasy sports. PrizePicks was among several DFS operators that fought particularly hard to stay in Florida after regulators ruled against their games earlier this year.

A spokesperson with Bonta’s office said there are no updates to share at this time.

California’s Indian tribes hold the proverbial keys to legal sports betting. They oppose pick ’em DFS but have been open to discussions with PrizePicks.

PrizePicks grows fantasy business

At a time when the US sports betting graveyard is expanding, and publicly traded companies like Bally’s and Penn Entertainment face pressure from investors displeased with deep investment in sports betting with minimal success in return, PrizePicks is growing.

PrizePicks grew app downloads by 64% last football season, amassing 3.2 million ahead of the Super Bowl, according to Citizens JMP Securities. In April, it announced a new $25 million33,000-square-foot headquarters in Atlanta, and said plans to add 1,000 jobs over the next seven years.

“At the end of the day, PrizePicks can acquire a small sportsbook, and they can start the process of building up their tech for one day when California launches, they’re ready; when Texas launches, they’re ready,” the source said. “I would imagine that’s probably what they’re looking for. But at the end of the day just because you hire bankers doesn’t mean you’re going to do some huge acquisition. You might do something smaller and do a tuck-in that’s going to help some part of your business and grow from there.”

LSR reporter Mike Mazzeo contributed to this story.

Photo by Shutterstock/Jota Buyinch Photo