## Flutter’s Major Shift
Fundamentally, performance reports are backward-looking documents, but for Flutter, this year’s annual report also signifies the conclusion of a period.
Flutter Entertainment revealed a shareholder discussion concerning a possible dual listing of its stock on the New York Stock Exchange a fortnight ago, skillfully overshadowing its own annual outcomes.
The statement presented to the London Stock Exchange (at least for the present, still its listing location) indicated that its board “routinely examines how to best position the organization to achieve its shareholder interests strategically.”
The statement continued that another area the board has been “assessing for a while” is the group’s listing framework. A capital markets day held in New York in mid-November (attended by over 300 individuals) “emphasized the escalating significance of FanDuel to the entire group,” which is becoming Flutter’s largest enterprise by revenue and an increasingly substantial portion of its overall worth.
The statement continued: “In this context, the board has tentatively concluded that an additional listing of Flutter ordinary shares in the United States would provide a number of long-term strategic and capital market advantages.”
The advantages of this move include boosting the group’s visibility in the United States, enhancing recruitment and retention of American talent, granting the group access to deeper capital markets and new US domestic investors, improving the overall liquidity of Flutter stock, and, as a subsequent step, choosing to go public in the United States – one of the requirements for inclusion in major US indices.
Initially, FanDuel’s market share reached 50% in the final quarter, holding a 21% market share in the iGaming sector, showcasing its dominance in the US market.
More specifically, the company stated in its accompanying results presentation that FanDuel ranked first in sports betting in 15 out of 18 states, with only Colorado (still holding a 33% market share), Iowa (42%), and Wyoming (18%) being exceptions.
Beyond investments made prior to the launch in Maryland and Ohio markets – which launched at the end of last year and in January respectively – the company stated that FanDuel reported positive quarterly contributions to earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second and fourth quarters.
US revenue reached the upper end of expectations at £2.6 billion, increasing by 67% year-over-year, while annual EBITDA losses were capped at £250 million, at the lower end of previous guidance.
There is no doubt that these are merely the foundations for future expansion.
FanDuel anticipates turning a profit in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the entirety of 2023. During a conference call with investors, Chief Executive Officer Peter Jackson elaborated on FanDuel’s “cumulative edge.”
“We’re observing greater retention rates and trading volumes compared to our rivals,” Jackson stated. “We possess a structural advantage in terms of revenue generation, and we are confident in our superior efficiency in acquiring new customers.”
In light of this robust performance, FanDuel should contemplate a dual listing in the United States. James Whitcroft of Jefferies in London proposed that this maneuver could potentially result in Flutter ultimately selecting New York as its primary listing location.
Peel Hunt’s Ivor Jones concurred. “Flutter is progressively shifting its focus towards North America, rendering a listing in the United States increasingly logical,” he remarked.
Although the US market appears promising, it’s crucial to acknowledge that even if the company were to list in the US, it would remain a global gambling enterprise and already generates substantial revenue. The company’s EBITDA in 2021 amounted to £1.62 billion, and while the US operation is the largest geographically, the UK and Ireland business still commands a value of £2.14 billion, despite being impacted by affordability and responsible gambling initiatives.
Australia contributed £1.26 billion in revenue, and the international business (recently expanded through the acquisition of Sisal) generated £1.68 billion in revenue.
These business divisions, collectively, generate the revenue and power the US operations, propelling its expansion.
Jordan Bender from JMP asserts: “FanDuel is demonstrating its early mover advantage, its alliance with extensive global entities distinguishes it from any US rival.”
As Paul Leyland of Regulus Partners states: “It’s difficult to envision how a disruptor could diminish Flutter’s market dominance in key territories without a complete transformation of their customer offering.”
While a significant US listing appears unavoidable, New York will acquire a global betting enterprise of unparalleled size and sway, while London will forfeit it. This will not only affect Flutter, but the entire sector from its peak to its base.
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