Cayman Islands-based billionaire Kenneth Dart has paused stakebuilding in Flutter Entertainment for the past month, after quietly breaching the 30 per cent level through the use of financial derivates, as he adds to his bets elsewhere in the gaming industry.
Dart, heir to a foam-cup manufacturing fortune, emerged on August 14th as a 5.8 per cent shareholder in DraftKings, the US’s second-largest online sports betting company, behind Flutter’s FanDuel brand.
He was also forced a day earlier to make a mandatory takeover bid for Swedish gaming technology Evolution AB, which develops software for online casino operators, after his stake passed through the 30 per cent level in late July. If a shareholder’s stake breaks through that crucial threshold, they are required to make a takeover bid in several EU countries, including Sweden and Ireland.
The 71-year-old also exceeded the 30 per cent level in Flutter last month as he continued an aggressive strategy of adding to his position. However, as 12.6 percentage points of his current 31.4 per cent economic interest is by way of financial derivatives called cash-settled equity swaps, rather than ordinary shares, he has avoided having to make a compulsory takeover offer for the Irish company.
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The month-long pause in adding to his Flutter position has been Dart’s longest inactive period since he first revealed that he was a shareholder almost 12 months ago, within an initial 5 per cent equity stake. It has also fuelled speculation in quarters of the market as to what the reclusive billionaire’s next move might be.
Shares in Evolution AB have jumped by close to 30 per cent since Dart’s holding in the company exceeded 30 per cent. A mandatory takeover bid from Dart’s Candle Lake investment company within weeks of that event was valued at the highest level at which he had bought shares in the company over the preceding six months, the minimum required by Swedish law. However, the board rejected that offer as undervaluing the company and its prospects and recommended shareholders reject it.
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The acceptance period began on August 17th and is scheduled to close on Tuesday. Shares in the company are changing hands 28 per cent above the offer, meaning there is little incentive for investors to take it.
Shares in Flutter and DraftKings have slumped 64 per cent and 42 per cent, respectively, in the past 12 months, as the two biggest beneficiaries of the opening up of the US sports betting market eight years ago have been left scrambling to catch up in the fast-growing predictions market, which is dominated by companies called Kalshi and Polymarket. Flutter acquired an initial stake in FanDuel following a 2018 federal supreme court ruling allowing individual states to liberalise sports betting. The combined value of his stakes in the two companies is $6.18 billion (€5.36 billion).
Flutter, also owner of Paddy Power and Betfair, cut its full-year profit forecast and announced the departure of chief executive Peter Jackson last month. It also paused a share buyback programme as it prioritises “investment in our core business and strategic initiatives, including prediction markets, while maintaining a clear focus on deleveraging”.
Dart’s family wealth stems from his grandfather founding Dart Manufacturing, the world’s largest maker of styrofoam cups.
Over decades, Dart expanded his wealth by buying distressed sovereign debt from countries including Argentina, Brazil and Greece – often engaging in lawsuits to squeeze more out of debtors seeking to restructure their borrowings.
The contrarian investor’s recent focus on the gambling industry follows big bets on tobacco giants British American Tobacco and Imperial Brands at the start of this decade, defying an ethical exodus from such companies.
