Could Flutter’s US expansion rock its premium London stock listing?
Gaming giant Flutter is gearing up for a secondary listing on the New York Stock Exchange (NYSE) at the end of the month, much to the dismay of rival London’s blue-chip index, where its premium listing resides.
After receiving shareholder approval, the UK’s largest listed gambling stock announced last summer it is working towards a secondary listing across the Atlantic on 29 January.
Flutter chief executive, Peter Jackson has said it “will bring the group significant benefits from accessing the world’s deepest and most liquid capital markets.
“Overall, the significant potential for US growth and ability to leverage scale benefits across our diversified portfolio outside of the US underpins our confidence in our significant and sustainable long term earnings growth potential,” he added.
In the US market, where Flutter recently generated 40 per cent of its revenues from, the company is thriving.
FanDuel, its online fantasy sports platform, has surged in popularity, with a 52 per cent revenue spike in the third quarter. This was fuelled by a 38 per cent rise in punters in November, largely thanks to the National Football League (NFL).
In its most recent quarter, the Paddy Power and Betfair owner generated 40 per cent of its revenues from the US market.
Recent market dynamics have also shown a positive trend for Flutter. Peel Hunt upgraded its rating of the stock from ‘hold’ to ‘buy,’ noting that Flutter’s FanDuel brand is familiar to many US investors.
“The shares offer them exposure to a fast-growing local market leader with a cash cow international business,” analysts said in a note.
Flutter has insisted that its place in the FTSE 100 “will not be affected” by the addition of the US listing.
That is largely correct. It means it is “business as usual” for index funds with the stock, according to AJ Bell investment director Russ Mould.
But that may not always be the case. Flutter, which also owns Sportsbet and Sisal, has been open about the potential of ditching the London listing at some point in the future.
Shareholders willing, “the group may pursue a primary listing in the US in due course,” it has said.
“London-listed companies typically add a US stock listing if they want to be valued on a higher rating,” Mould explained.
“If that leads to the bulk of the trading in the shares happening in the US rather than the UK, a company such as Flutter could argue that it makes sense to switch its primary listing to the States.
“At that point, it would no longer qualify for the FTSE indices,” he added.
There could of course be certain disadvantages to this. Such a move would mean the group will lose its ranking in the FTSE 100 and have to wait to join a US index. Plus, being worth £23.6bn might be a lot in London, but it would make Flutter a small fish in a big New York-sized pond.
Peel Hunt analyst Ivor Jones told Morning Wire that Flutter is “hedging its bets” by having two options.
He said: “It has the option to end the London listing once it has seen what proportion of trading takes place on the NYSE.
“As long as there is plenty of liquidity in NY and if shareholders are OK with it then delisting from London would save some costs and will seem increasingly appropriate as the US business grows to account for the majority of the total”.
For now though, the UK’s largest listed gambling stock is staying in the City.
Flutter will trade in NYSE under the ticker symbol ‘FLUT’ but will continue to trade on the London Stock Exchange under ‘FLTR’.