Flutter Entertainment PLC's (LON:FLTR) shares moved higher on Monday as the owner of the Paddy Power and Betfair brands said it is considering a possible initial public offering for its US betting business FanDuel.
Responding to press speculation, the FTSE 100 firm said the listing of “a small shareholding” of FanDuel is currently being considered but no decision has been made at this time.
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The firm said a potential listing of FanDuel forms part of an assessment on how best to deliver on its current strategy.
In a note, analysts at Peel Hunt valued FanDuel at around £12bn of Flutter’s £27bn market cap, adding that FanDuel’s smaller rival, DraftKings Inc (NASDAQ:DKNG), trades at a market value of US$28.5bn which they said “appears to support the argument that FanDuel is undervalued”.
“However, in December last year, Flutter acquired 37% of FanDuel at a price that valued FanDuel at US$11.2bn. At that time Flutter said that this was below market value and reflected the fact that the vendors wanted to achieve certainty as to value and timing of payment for their stake, in place of options exercisable in July 2021 and July 2023. US broadcaster Fox has the option to buy 18.6% of FanDuel from Flutter in July 2021 based on a valuation to be determined by two investment banks. A US listing for FanDuel, if it could be achieved before July, could provide a higher valuation reference point than the December transaction. We believe this could be one reason for pursuing the US listing for FanDuel”, the broker added.
Despite this, Peel Hunt said they continued to believe that Flutter is overvalued and reiterated their ‘reduce’ rating and 13,100p price target on the stock.
Shares in Flutter jumped 6.2% to 16,780p in early deals.