LSB Feature: SPAC’s Influence In The Legal Sports Betting World

Sportsbooks like DraftKings have gone public.
Flutter Entertainment is considering making FanDuel its own company and making it go public.
Diamond Eagle is looking to invest in sports betting company theScore.

NEW YORK – The legal sports betting market has continued to bloom and more investment companies have noticed the potential benefits of investing in sports betting.

Special Purpose Acquisition Companies (SPAC) like Flutter Entertainment, Diamond Eagle, Capitol Acquisition, Horizon, and many more have participated in merger partnerships with sports betting operations, allowing them to grow and go public.

With more states regulating sports betting launching and sports betting operations expanding their market share, SPAC’s will surely continue to invest and acquire sportsbooks, seeing the major value in it.

SPAC’s And Legal Sports Betting

What SPACs do is operate as a blank check company. They supply the funds for companies who wish to expand and go public, allowing them to be traded on the stock exchange.

In the legal sports betting world, a SPAC would supply funding for a sportsbook, or a sports gaming company would need to create stocks and push their company further. Sports betting is still a relatively new form of investing for major acquisition companies, so this trend is expected to continue to expand into the future.

As sports betting continues to expand to new markets, more books are expected to ally with SPACs for more resources and overall company expansion.

“In terms of business formation and new strategies, we’re still in the early stages of this,” said Robert Heller, president and CEO of Spectrum Gaming Capital, an investment bank specializing in gaming, casinos, and sports betting. “This is an immature business, and immature businesses are times of great opportunity for people to come into the space with disruptive technologies.”

According to a report released by the US SPAC Monitor, more than 460 acquisition companies are entering the legal sports betting market in 2021 alone.

The success of companies like Diamond Eagle with their partnership with DraftKings and Flutter Entertainment with their subsidiary FanDuel has affected the market exponentially.

Both Flutter Entertainment and Diamond Eagle’s DraftKings are saw company growth of more than 32% since the repeal of PASPA in 2018. DraftKings went public in 2020 and the success it has seen so far is tempting to other SPACs who want to get in on the betting trend.

“Today marks another milestone for DraftKings and the future of digital sports entertainment and gaming in America,” said Jason Robins co-founder and CEO of DraftKings. “By bringing together our leading consumer brand, data science expertise, and industry-leading products with SBTech’s proven technology platform, we will accelerate our innovation, growth and scale. I am confident that the new DraftKings will progress our goal of offering the best, most innovative sports and gaming products to our customers.”

Other companies could see similar successes, as sports betting popularity is at an all-time high and is expected to continue to grow. SPACs are willing to take that bet.

New Moves In The Market

Flutter Entertainment is aware it is sitting on a gold mine. The company has the biggest sports betting market share in the US and has increased its initial investment into FanDuel now owning 95% of the sportsbook.

*Flutter to Increase Stake in FanDuel

• Flutter Entertainment to acquire 37.2% interest in FanDuel for $4.175 billion in cash and stock, implying $11.2 billion valuation

• Company’s ownership stake in FanDuel to increase to 95% (currently 57.8%)

— Roundhill Investments (@roundhill) December 3, 2020

Flutter is currently considering making FanDuel its own IPO, allowing the sportsbook to go public in the likes of DraftKings and be traded on the NASDAQ.

“In an ever-consolidating sector, we see strategic merit from ensuring a valuation multiple comparable to peers, plus the benefit of accelerated debt reduction from any IPO proceeds,” said Jefferies analysts.

To not be outdone, Diamond Eagle and DraftKings have set their sites on moves to expand their market share. DraftKings has expressed interest in acquiring Score Media, the parent company of theScore Bet. While this is just a rumor, the mere fact that the sportsbook may have interest in the company has increased its share prices.

There is a bevy of SPACs investing in sports betting and more are only expected to join in the fray. As sports betting fans continue to bet on sports, SPACs continue to bet on the sports betting market. So far, it has proven to be a good wager.

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Giovanni Shorter

Coming from a background in narrative-based writing, Giovanni strives to write stories that will keep the reader engaged. Although he does pride himself in being accurate, how the story is told is also very important to him. When he’s not keeping readers up to date on sports betting laws and legislation, you can find him writing and recording music, playing videogames, or engaged in heated sports debates with his friends.