The City expects Flutter’s NYSE listing to have an impact on the corporate valuation disciplines of gambling PLCs… But nothing can stop the industry’s M&A momentum.
The frantic movements of gambling PLCs have dominated industry headlines in the early proceedings of 2024.
On the European front, despite no regulatory resolutions being settled in the past year, gambling PLCs continue their strategic manoeuvers to maintain growth and market share within saturated European markets, undertaking what is gambling’s toughest assignment.
Thus far, in January, gambling has witnessed FTSE100 Entain PLC call for an overhaul of its corporate strategy, leadership, and governance following the departure of CEO Jette Nygaard-Andersen.
This week further noises were made as French lottery giant Française des Jeux (FDJ) put PLC counterparts on notice, tabling a €2.6bn acquisition for Kindred Group, in a bold bid to become “Europe’s second-largest gambling operator”.
Yet for City observers, January’s headline affair is yet to come as Flutter Entertainment sanctions its dual listing on the New York Stock Exchange (NYSE) on Monday, 29 January.
A ripple effect is expected as Flutter’s dual listing on the NYSE will carry ramifications for the key disciplines of corporate valuations, investor analysis, leadership strategies, and competitor comparatives among all gambling PLCs.
As Flutter moves to enhance its investor profile in US capital markets, Russell Pointon, Head of Consumer and Media markets at investment research firm Edison Group, noted how the NYSE listing might increase Flutter’s influence on investor perceptions of UK gambling PLCs.
“Flutter’s share price performance over the last 12 months has been the notable exception in the UK, due to a combination of relative operational performance and no doubt helped by the news re its US listing,” he detailed to SBC.
“Flutter’s valuation may be used as a read-across to the remaining companies; however, the individual companies in the UK sector have a diverse range of industry and geographic exposures and levels of success, so their individual fundamentals remain as important to potential investors.”
Though the NYSE listing will be consequential to investment factors and valuation disciplines, Paul Richardson of global gambling M&A advisory Partis Solutions doubts that Flutter’s New York future will rock the current state of play for gambling PLCs in Europe and North America.
Questioned if Monday’s listing should be viewed as a transformative event for the sector, Richardson responded: “Not really, DraftKings is already a massive presence in the sector, but this does obviously allow US investors to invest in the other market leader more easily.
“With MGM also pushing hard with its online strategy, the ability for investors to choose their sweet spot has, however, expanded.”
For Richardson, the greatest impact will likely be felt by the London Stock Exchange (LSE), as it “reduces the importance of the UK’s financial markets with the LSE losing a major player”.
Though deemed as its ‘secondary listing’ by Flutter, Richardson acknowledged the trend of reducing investor appetite for betting and gaming stocks in the UK (driven by ESG concerns). “You do have to wonder how many companies that are thinking about an IPO will seriously consider the UK,” he said.
Flutter will set a new benchmark on investment disciplines, yet City eyes remain focused on the gambling industry’s ever-present M&A backdrop, moving onto new markets.
Commenting on market realities in the UK and Europe, Pointon said that the online gaming sector “has seen a good deal of M&A activity, so the pool of investment opportunities continues to shrink”.
Ahead of Flutter ringing the NYSE bell on Monday, Richardson concluded: “The listing itself is not going to make much difference. Flutter will stay in the same markets as before but will likely have more firepower for acquisitions.
“The transaction puts the gaming sector on the front page which, coupled with developments like Brazil and possibly New York iGaming, should drive investor enthusiasm for the sector and hence increased M&A and valuations.”