Fox files lawsuit against Flutter over FanDuel ownership stake as IPO looms

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FLTR-IEFOXAFanDuel mobile appSource: FanDuel

Fox has filed a confidential lawsuit against Flutter, the U.K.-based majority owner of FanDuel, to secure its option to buy into FanDuel Group at the same price Flutter paid in December — a much lower price than what Flutter believes FanDuel is worth today.

Fox wants to acquire an 18.6% stake in FanDuel at an $11.2 billion valuation — the value set when Flutter acquired a 37.2% stake in FanDuel from Fastball in December. But Flutter has argued Fox must pay “fair market value” to exercise the option in July. That price could be determined by a FanDuel initial public offering, which Flutter is considering. If FanDuel isn’t spun out by July, Flutter has said that banks will determine FanDuel’s fair value. That value is likely to be higher than rival DraftKings‘ $25 billion market capitalization, given FanDuel’s higher market share in key markets.

Fox filed the suit last week to New York’s Judicial Arbitration and Mediation Services (JAMS), a company spokesperson confirmed.

“Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6% ownership interest in FanDuel Group — an American sports betting brand — for the same price that Flutter paid for that interest in December 2020,” a Fox spokesperson said in a statement given to CNBC. “The suit was filed as an arbitration before JAMS in New York, NY by consent of the parties.”

Flutter is considering taking FanDuel public — as first reported by CNBC last month — as the sports betting market is on the verge of exploding, with 19 states set to vote on mobile legalization this year. U.S. sports betting led to $30 billion in gross gaming revenue in 2020, according to The Action Network, a sports gambling news and analysis company.

It is unclear if the Fox lawsuit will interrupt planning around the FanDuel IPO. If an IPO proceeds, pending litigation could affect how investors value a publicly traded company.

A Flutter spokesperson did not immediately respond to request for comment.

Valuing FanDuel

FanDuel has consistently led DraftKings in market share in Illinois, New Jersey and Pennsylvania — three of the largest