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IPO Could Be Ahead For Sports Betting Platform Fox Bet: Research Firm

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IPO Could Be Ahead For Sports Betting Platform Fox Bet: Research Firm

Fox Bet, a joint venture between Flutter Entertainment (OTC: PDYPY) and Fox Corp (NASDAQ: FOXA), is rumored to be planning an initial public offering, according to an industry research firm. 

What Happened: Research firm Eilers & Krejcik said in a newsletter that a potential Fox Bet IPO could be coming.

A Fox Bet IPO would give parent company Flutter the chance to spin off its other U.S. brand "in a frothy market," the newsletter said. 

Why It’s Important: Flutter, the world’s largest online gaming firm, is the owner of two sports betting brands in the U.S. market.

A FoxBet IPO would allow it to focus completely on FanDuel. Another possibility would be to combine Fox Bet and FanDuel and create a larger pure play sports betting company in the U.S.

Flutter has strong sports betting market share in the U.S., with 44% compared to DraftKings (NASDAQ: DKNG), which has 34% market share. The company’s iGaming share is 27% compared to DraftKings' 10% market share.

Fox’s Assets: An IPO of Fox Bet could help boost the value of the assets help by parent Fox Corp.

Fox Corp. created the Fox Bet joint venture with The Stars Group, which was acquired by Flutter.

Fox paid $236 million to acquire 5% of The Stars Group. When Flutter acquired The Stars Group, it worked out a deal with Fox. That deal included Fox owning a stake in FanDuel and the rights to own 18.5% of FanDuel by 2021 and the rights to own up to 50% of the U.S. operations.

Fox Corp. once owned a 6% stake in Flutter rival DraftKings. The stake, which Fox paid $160 million for in 2015, is now owned by The Walt Disney Company (NYSE: DIS) after their acquisition of 21st Century Fox.

The stake, which is over 18 million shares and represents around 6% of DraftKings, is worth more than $700 million today.

What’s Next: A Fox Bet IPO or any spinoff of U.S. assets by Flutter on an American exchange would create a pure play sports betting company that would directly compete with DraftKings. 

Penn National (NASDAQ: PENN), which is launching the Barstool App, is the most similar play today.

Flutter is working on growing its two sports betting brands in the U.S. markets. CFox Bet is currently only available in Colorado, New Jersey and Pennsylvania and has a market share of around 2%. FanDuel has online betting in six states and is available in 10 total states thanks to retail partnerships.

Michigan, Tennessee and Illinois were all highlighted as the next launches in 2020 in an investor presentation.

DKNG, PENN, BETZ Price Action: DraftKings shares were trading down 7.73% Friday at $35.31. Penn National shares were down 3.54% at $52.01. Both stocks are up more than 100% in 2020.

Roundhill Sports Betting ETF (NYSE: BETZ) shares were down 2.09% at $19. The ETF has risen more than 20% since its June 2020 launch.

Latest Ratings for FOXA

DateFirmActionFromTo
Aug 2020RosenblattMaintainsSell
Aug 2020BMO CapitalMaintainsMarket Perform
Jul 2020Goldman SachsInitiates Coverage OnSell

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