The public is finally getting an idea of how the former FanDuel board allegedly breached its fiduciary duties to its shareholders, according to a company founder.
FanDuel co-founder Nigel Eccles posted a 216-page filing on X Wednesday that allegedly details exactly how the merger between Paddy Power Betfair and FanDuel led to only preferred shareholders getting credit for held equity. FanDuel does not comment on pending litigation, a spokesperson told LSR.
The document, submitted to the court last Friday, follows the New York State Court of Appeals ruling in May. That overturned an October 2022 ruling dismissing claims from more than 100 former shareholders that did not get their deserved piece of the merged company.
“Standing up against the likes of KKR is not easy, but I’m determined that the team of 100+ amazing people who spent years building FanDuel from the ground up will get back what was stolen from them in 2018,” Eccles said.
FanDuel founder lawsuit background
The New York lawsuit was filed in 2020, two years after the original suit was filed in Scotland. The plaintiffs want more than $120 million, or the estimated market value of their combined stake at the time of the sale.
The terms of the merger set aside the first $559 million of the deal for preferred shareholders. That was the number FanDuel was deemed to be worth. That notably did not include any potential impact from US sports betting.
Emails sent from KKR, a preferred shareholder that controlled the board with Shamrock, confirmed the best action was to “collapse the waterfall” with a valuation artificially set below that $559 million level.
“Plaintiffs’ allegations—viewed in their most favorable light and according them every possible favorable inference—are sufficient to state a claim that the director defendants at least owed limited fiduciary duties to plaintiffs,” the appeals court ruled.
FanDuel management: no fair value
Dave VanEgmond, an executive VP at FanDuel, later said the $559 million valuation was not based on a fair market value in an email to investors.
“Please note, there is no fair market valuation as of today and the ownership percentage was derived from a relative value exercise,” VanEgmond said.
Did Boyd deal show truth?
FanDuel signed an agreement with Boyd that gave the sportsbook the use of Boyd’s market access in exchange for 5% of the online gaming company.
The valuation of the 40% of the combined FanDuel-Paddy Power Betfair company owned by FanDuel holders was valued at more than $1.3 billion for the deal, according to a different model used.
