Posted: November 10, 2022, 07:35 pm
Last Updated: November 10, 2022, 07:35 PM.
A recent arbitration decision by the Judicial Arbitration and Mediation Services (JAMS) of New York at Fox. Corp. ( NASDAQ:FOXA )’s rift with FanDuel parent Flutter Entertainment ( OTC:PDYPY ) could mean the end of Fox Bet.
In its latest edition of two weeks EKG line According to the report, research firm Eilers & Krejcik Gaming (EKG) said the JAMS ruling could mark the end of Fox Bet, paving the way for Fox to acquire 18.6% of FanDuel at a valuation of $22.4 billion, adding 5% annually.
According to the research firm, Fox bets are on borrowed time. “Both Fox and Flutter may terminate the Fox Bet Agreement in August 2023 and dissolve the business.”
Fox will be controlled by Flutter, a major investor in the 2020 $12.2 billion acquisition of Starz Group (TSG).
Fox Bet Badly Lagged
Flutter CEO Peter Jackson previously described Fox Bet as a “struggling” business, and the data backs up that view, but the sports company has allocated capital to strengthen the business.
“The arbitrator ruled that Flutter provided more than ‘commercially reasonable resources’ to Fox Bet, but its performance was nonetheless low,” EKG noted.
Fox Bet is losing about $60 million a year, representing about 20% of Flutter’s earnings before interest, taxes, depreciation and amortization (EBITDA) losses in the first half of the year, indicating the operator has good reason to consider closing the unit. .
In addition, Fox Bet only has a tiny 0.2% share of the total US online sports betting market and its share is slipping in Pennsylvania, one of the country’s largest sports betting states, according to EKG.
“In this context, Fox Bet seems destined to join the growing number of brands to exit the US OSB, including BetAmerica, Fubo Sportsbook and theScore Bet,” EKG said.
What’s next for Fox/FanDuel?
Fox has made no secret that it wants to acquire 18.6% of FanDuel, and Flutter has said it intends to honor that agreement. The sticking point, however, was the price tag Fox was forced to pay. While the JAMS ruling may seem favorable, FanDuel’s $22.4 billion valuation is rich given current market conditions and more than four times DraftKings’ ( NASDAQ:DKNG ) market capitalization.
Because of that, EKG speculates that Fox will take its time building up FanDuel stake — 10 years. Or the media company could look to reduce its roughly $7 billion in debt by selling its interest in the sportsbook operator to another party, but now is not the time to do that because of market volatility.
Speaking of broader market conditions, they could hinder Flutter’s FanDuel’s widely anticipated rotation. A deal was expected to happen this year, but it was not to be. Betfair parent has not set a date for when it might offer a stake in FanDuel to public investors.
“It’s unclear how the option would work in that situation, but FanDuel has long said it would IPO only a small portion of the business, meaning Fox could (theoretically) still exercise its option on the rest,” EKG concluded.