ValueAct Takes $78 Million Stake in FanDuel Parent Flutter Entertainment

Posted on: May 17, 2024, 01:44h. 

Last updated on: May 17, 2024, 01:44h.

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

ValueAct, a San Francisco-based hedge fund, took a stake in FanDuel parent Flutter Entertainment (NYSE: FLUT) in the first quarter.

Flutter FOX Bet
The Flutter logo as seen in an investor deck. Hedge fund ValueAct took a $78.18 million stake in the gaming company in the first quarter. (Image: Flutter Entertainment)

The money manager bought 495,135 shares of the Dublin-based gaming company valued at $78.18 million in the first three months of the year, according to a Form 13F filing with the Securities and Exchange Commission (SEC).

That’s a new position for ValueAct and the hedge fund’s lone source of direct exposure to the sports wagering industry. Flutter is one of 12 equity positions listed in the regulatory document. Flutter now represents 1.72% of ValueAct’s portfolio.

ValueAct Investment Could Justify Flutter Move to NYSE

While ValueAct’s $78.18 million stake in Flutter represents a scant percentage of the company’s $37.33 billion market capitalization, the investment could be justification for the sportsbook operator’s decision to list its shares on the New York Stock Exchange (NYSE).

That move occurred on Jan. 29. Prior to that, Flutter told investors one of the reasons it wanted to list in New York was to expand its audience of professional investors. ValueAct taking a stake in the gaming company is one example that the NYSE listing has already been validated, but there’s more to that story.

First-quarter 13F filings indicated at least 135 money managers own shares of Flutter, according to the SEC. It’s likely many of those positions predate the gaming company listing in New York, but it’s also probable that ValueAct isn’t the only professional market participant that initiated a position in the FanDuel parent in the first three months of 2024.

That rising investor group could be among the reasons why Flutter shareholders earlier this month overwhelmingly approved the company’s plan to shift its primary listing to the NYSE — a move Jefferies Equity Research analyst James Wheatcroft expects could occur as soon as May 31. He rates the stock a “buy” with a $275 price target, implying upside of about 35% from current levels. In a note to clients out earlier this week, Wheatcroft observed that Flutter trades at 17x cash flow, implying its deeply discounted relative to DraftKings (NASDAQ: DKNG). DraftKings, Flutter’s primary US rival, trades at 39x cash flows, according to the analyst.

What ValueAct Might Want with Flutter

In some circles, ValueAct is described as an activist investor, which implies it will push for board seats or some of change at Flutter. However, the hedge fund hasn’t announced such plans and its current ownership of the gaming equity is likely too small to affect substantial change at the frm.

ValueAct, which has invested in over 100 companies and served on 47 boards, described itself as a long-term investor, indicating it could hold its Flutter position for some time.

“Our goal is to leave a company in a better position than when we first invested in it. We regularly hold positions for 3-5 years. Occasionally we hold positions for 10 years or more,” according to the hedge fund.