FanDuel, Fanatics Could be Among 2023’s Hottest IPOs

Posted on: January 4, 2023, 03:00h. 

Last updated on: January 4, 2023, 10:18h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Owing to weak market conditions, there was an initial public offering (IPO) slump in 2022, but expectations are in place for a 2023 rebound.

Fanatics IPO
The famous charging bull on Wall Street. FanDuel and Fanatics could lead a rebound in IPO activity this year. (Image: Reuters)

If that scenario materializes, the gaming space could be a driver of the resurgence, potentially on the backs of FanDuel and Fanatics, which are easily two of the most widely anticipated IPOs, regardless of industry.

Following a bumper crop of IPOs in 2021, last year’s field of 71 deals that raised at least $50 million brought in just $7.7 billion — a 95% year-over-decline. Fizzled transactions among special purpose acquisition companies (SPACs), including several in the gaming space, plagued the IPO market in 2022.

While a cap on IPO enthusiasm could linger over the near term, market observers are optimistic a thaw will arrive. That’s if stocks start 2023 on a strong note and if the Federal Reserve signals it will reduce the intensity of interest rate hikes this year.

FanDuel, Fanatics Could be 2023 IPO Darlings

To be certain, neither FanDuel nor Fanatics have announced plans for 2023 IPOs. But it’s widely viewed as a logical step for both companies.

In the case of FanDuel — the largest online sportsbook operator in the US — parent company Flutter Entertainment (OTC: PDYPY) has teased spinning off a portion of FanDuel to public investors. Those plans were derailed in 2022 by executive turnover, litigation with Fox Corp. (NASDAQ: FOXA), and the aforementioned broader market turbulence.

It’s not yet known how much the online gaming giant would raise in an IPO, but it’s fair to say that FanDuel would be valued well in excess of rival DraftKings’ (NASDAQ: DKNG) current market capitalization of $4.91 billion.

As for Fanatics, that company is worth an estimated $31 billion following a $700 million capital raise last month. By some estimates, Fanatics could be one of the largest, if not the largest IPO of 2023, though it’s possible that if grocery-delivery firm Instacart goes public, it will top Fanatics.

Fanatics IPO Update

Entering 2022, market participants were eagerly anticipating a Fanatics IPO. Market weakness and lack of investor enthusiasm for growth stocks dented those plans. However, there’s speculation that the Florida-based sports apparel maker and sportsbook operator recently held talks with investment banks about going public.

Fanatics founder Michael Rubin recently said the plan is to grow the company to $100 billion over the next decade. Sources with internal knowledge of the operation believe the goal is $10 billion of earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of those 10 years.

It’s not just a Fanatics IPO that’s potentially notable. It’s the company’s broader entry into the sports wagering arena, which some analysts fear could stoke a fresh round of elevated promotional spending by operators, delaying profitability in the process.