Analysis: Could Fanatics Use New $1.5 Billion Raise In Sports Betting?

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Fanatics has raised another $1.5 billion to fund its expansion into new businesses, including sports betting.

The apparel giant raised at a $27 billion valuation, per the Wall Street Journal, up 50% from its last round in August.

Of course, the new influx of cash prompted immediate speculation about how Fanatics would deploy the capital.

Shortcut to US sports betting for Fanatics?

The apparel company has made no bones about its US sports betting ambitions.

The company hired former FanDuel CEO Matt King last year to lead its betting division. Most analysts assumed Fanatics would try to expedite those plans via M&A rather than building from scratch.

However, in a recent interview, Fanatics CEO Michael Rubin appeared to narrow down the pool of potential targets.

“We have the team and the capital, but there’s no [domestic] businesses at their current market value that I have any interest in buying,” Rubin told Sports Business Journal.

“We’ll grow organically and by M&A, but we’re not interested in any M&A in the US. … In the US, the companies are losing so much money, they just aren’t attractive acquisition targets for us yet. Overseas, there’s much better businesses that could be interesting.”

Going global

Kambi might be one logical international target.

The two previously agreed to work together for New York sports betting during the bidding process.

The Swedish-listed provider is theoretically an acquisition target again after ridding itself of its long-standing ‘poison pill.’

Market access first?

PointsBet is another logical option. The Australian-listed company is known to be exploring M&A options, and has valuable technology and market access.

Fanatics looked at PointsBet last year but decided against a deal, the NY Post reported. However, the economics of a potential deal have changed.

While Fanatics’ valuation has increased 50% since August, most publicly listed sports betting stocks are down at least 50% in that time. PointsBet is down around 63% in that period.

An operator might make more sense as a target, given market access is one of Fanatics’ priorities.

Flying solo

Of course, Fanatics could eschew M&A entirely and build organically.

The firm certainly has the financial firepower and braintrust to build out its own betting business. Fanatics Betting and Gaming has assembled a strong executive team:

The firm has been hiring big sportsbook roles for months and is currently hiring for 14 different sportsbook positions.

As for technology, Fanatics betting app could rely on Kambi and Strive Gaming. Those were its partners in its New York sports betting bid.

Would Fanatics really take the long road?

Although building a sportsbook business from scratch is undoubtedly a lengthy process, Fanatics has shown it is willing to be patient.

For one, it is privately owned. Other private operators like bet365 have chosen to wait until US customer economics make more sense.

Rubin appeared to reiterate that long-term view in the SBJ interview.

“We can be the No. 1 player in the world in that [sports betting] business in 10 years,” he said.