Backyard Coffee Conversation to Billion Dollar Sportsbook – The Investment History of FanDuel
FanDuel recently skyrocketed to the high mark in a month for sportsbook revenue in New Jersey. It’s amazing that FanDuel won’t turn 10-years old until later this summer. There have been ups and downs along the way, but FanDuel’s rise has fueled interest in the company stock. Here’s a history timeline for how FanDuel rose to become an attractive financial investment.
Conversation over Coffee in a Backyard in Texas
Five individuals were sitting around in a Texas backyard, a setting as normal as any across the United States. They were sipping coffee and debating their love of fantasy sports. There wasn’t really anything special about their discussions.
However, these five co-founders would do something others had not. They decided to work to create a new and exciting idea for fantasy sports enthusiasts. They wanted to use a framework where DFS players could win every day, and start over anew with each slate of games.
These five DFS fans wanted to venture away from the traditional year-long fantasy format, and they wanted to raise the stakes. Over the next few years FanDuel would explode in popularity, becoming one of the primary DFS sites in a multi-billion dollar industry.
A FanDuel Investment Timeline
Looking at the investment history for any company is an excellent way to gauge future potential. Much of an investment forecast is also related to the breadth of the financial possibilities going forward.
With FanDuel, all an eager investor would need to do is look at the wave of fascination with sports betting options sweeping across the country. Here’s a look at how the original five managed to secure the funding necessary to reach FanDuel’s current financial standing.
• July 21, 2009 – Nigel Eccles, Lesley Eccles, Tom Griffiths, Rob Jones and Chris Stafford launch the private daily fantasy company FanDuel. The company secured $1.2 million in initial investment venture capital from Pentech Ventures and Scottish Enterprise.
• January 2013 – There was subsequently a large influx in capital under Series C Funding guidelines. The investment amount closed at $11 million, and included funds primarily from Comcast Ventures.
• September 2014 – Another $70 million in capital was secured under Series D Funding.
• July 2015 – Less than a year later, a Series E Fund of $275 million pushed FanDuel’s value over $1 billion.
• August 2015 – Just a few weeks after the large influx of capital, FanDuel announced it had acquired the sports analytics company NumberFire. In September, they added an esports daily fantasy service known as AlphaDraft.
The Merger that Wasn’t
Maybe the biggest financial story of FanDuel’s first decade was one that never happened. In November 2016, FanDuel and their primary competitor DraftKings proposed a merger of the two DFS giants.
This merger would have grown the customer base for the combined operations to over five million users. The new company that never materialized would have cornered an estimated 90-percent of the daily fantasy sports market.
This number caught the eye of the Federal Trade Commission (FTC). In June 2017, the FTC made both aware they would be seeking a temporary injunction to block the merger as a violation of anti-trust law. Rather than fight the FTC, the merger idea was dropped.
This attempted merger also exposed some things that had happened during the first years of both FanDuel and DraftKings. Each company paid a $1.3 million out-of-court settlement to the Massachusetts Attorney General in lieu of having court records reveal potential unfair business practices.
Within a month of paying this settlement, CEO and founder Nigel Eccles left FanDuel and Matt King once again held the position. Another of the original five left the company a few weeks later and it opened a spot for NumberFire executive Nik Bonaddio.
Acquired by Paddy Power Betfair
Just days after the landmark ruling by the US Supreme Court that overturned the Professional and Amateur Sports Protection Act of 1992, Paddy Power Betfair acquired FanDuel. Betfair is a massive bookmaker and gaming business based in Ireland and Britain.
The acquisition infused over $158 million in assets in FanDuel operations. Paddy Power Betfair has a 61-percent controlling interest in FanDuel now. That interest is expected to rise over the next few years.
The sale was finalized a couple months later, and in July 2018 FanDuel became the FanDuel Group. Within days, the first FanDuel sportsbook opened at the Meadowlands Racetrack in New Jersey. By November, FanDuel had formed an exclusive partnership with the National Hockey League as the official DFS site and sports betting partner.
Investing in FanDuel
To date, FanDuel is estimated to have secured over $361 million in capital investments. Much of that capital arrived with the acquisition by Betfair. A reverse merger was proposed with Platinum Eagle in 2018, that would have opened FanDuel on the NASDAQ.
However, the purchase by Betfair overshadowed this backdoor way of offering FanDuel stock publicly. With FanDuel’s position as the leading sportsbook in New Jersey, it is unlikely any changes will be made in the public investment structure in the near future.
Pennsylvania is the next horizon that the collective efforts of Betfair and FanDuel will focus. Even though the surge of sports betting is projected to skyrocket, it’s unlikely that FanDuel will revisit the idea of offering stock for public purchase.
The acquisition by Paddy Power Betfair almost totally eliminates any immediate chance of public investment opportunities. However, if you want to ride the wave of the lucrative financial potential of FanDuel, you can invest in Betfair.
Paddy Power Betfair is on the London Stock Exchange with call letters PPB. Their most recent close was at €66.98 on Friday May 17. PPB stock value fell to €64.30 in early March. There was a gradual rise until mid-April. As PPB and FanDuel sportsbook operations spread across the US, this stock has a healthy potential.
What started out as a backyard debate about the prospects of fantasy sports, all over a few cups of coffee, has turned into one of the leaders in the DFS and sportsbook industries. As the wave of sentiment pushes for states to join the sports betting bonanza, look for the value of the FanDuel Group and Betfair to become increasingly more financially appealing.