While the coronavirus pandemic has led to short-term discomfort for sports betting companies, the parent company of FanDuel and Fox Bet sees another angle: opportunity.
After closing its $6 billion merger with The Stars Group earlier this month, Flutter raised $998.6 million by placing 8 million new shares with institutional investors through an accelerated bookbuild.
The placing price was 10,100 pence per share, a discount of 4.7% from Thursday’s closing price.
As part of the offering, Fox Corporation is increasing its stake an unknown amount in the company.
“FOX is bullish about the opportunities in the digital sports wagering market,” CEO of Fox Corporation Lachlan Murdoch said. “FOX Bet has shown strong growth since launching last fall, and we look forward to continuing that success with our partner, Flutter. FOX’s investment in Flutter underscores our confidence in Flutter’s business and its management’s ability to continue to drive leadership in the U.S. market”.
FanDuel, Fox Bet want more market access
The top reason Flutter wants to raise cash is to accelerate its US sports betting strategy. It’s already live in five states with both brands in Colorado, New Jersey, Pennsylvania as well as FanDuel Sportsbook in Indiana and West Virginia; but it wants more.
First, Flutter wants more market access deals. The company expects more states to look at sports betting to help fill budget gaps from the coronavirus shut down. Flutter already has first-skin access in 11 additional states:
- California
- Iowa
- Illinois
- Kansas
- Louisiana
- Michigan
- Maryland
- Missouri
- New York
- Ohio
- Texas
That list doesn’t include the legalized but not-yet-live states of Tennessee and Virginia. Both will allow untethered sports betting licensees, so no access deals are required.
More states opening up means customer acquisition will increase. With the cash, Flutter will gain greater financial flexibility to move quickly on those market access and customer opportunities, the company said.
Flutter has also experienced “strong growth” in its online customer base with casinos, racetracks and sportsbooks shut down. There’s also been a resurgence in customer engagement with poker, the company added. Flutter will use the cash to retain customers and gain new ones from competitors with less-diversified offerings.
FanDuel Sportsbook secures DC access
FanDuel Sportsbook will also be in the nation’s capital at some point with Cordish Cos. as its partner.
The two announced they would look at Maryland, Washington, DC, and other jurisdictions when they announced their partnership in Pennsylvania last December.
Cordish CEO David Cordish told BisNow that his company would “for sure 100% be operating a major sportsbook in DC” with FanDuel.
Washington DC’s sports betting regulations limit the recently launched Gambet DC platform offered by the DC Lottery to district-wide operations. But other retail and geofenced online sportsbooks can launch at arenas, stadiums or, in this case, a sports bar.
“It is crucial to have a physical presence that is over the top to attract the in-person bettor,” he said.
Cordish said he’s planning to open a sports-oriented restaurant and bar with a sportsbook-like atmosphere. He’s narrowed his search down to two places he said were perfect, according to BisNow.
Second-quarter rebound looks promising
Flutter announced a trading update along with the placement announcement, which shows group revenue up 10% from April 1 through May 17 compared to last year.
That includes 61% revenue growth in the US, which has benefited from horse racing continuing and the closure of land-based casinos. That, along with its products and promotions, accelerated the migration of retail customers online, the company said.
Despite the revenue growth, Flutter is still facing a number of uncertainties. Those include when sports returns, the appetite of customers to return to betting shops and the overall demand following global economic contraction.
The cash will also improve Flutter’s balance sheet. This will let the company get closer to its net-debt-to-EBITDA goal of one to two times.
