Fantasy sports betting firm FanDuel claims it is “possible” but “not probable” that a $120 million court case brought against the firm by its Forfar-born co-founder will be successful.
Lesley Eccles and three of the other four founders of the tech firm – her husband Nigel, Thomas Griffiths and Rob Jones – filed a petition at the Court of Session in Edinburgh last year claiming its merger with Paddy Power Betfair purposely undervalued FanDuel’s worth.
FanDuel has more than a million customers, mostly in the US, who predict the outcomes of sporting events for cash prizes.
The Edinburgh-registered firm was valued at $465m in last May’s merger, a sum that meant there was no return for ordinary shareholders, which included the founders and around 500 other investors.
Majority shareholders – the US private equity houses Shamrock Capital Advisers and Kohlberg Kravis Roberts (KKR), which respectively led $70m and $275m funding rounds in FanDuel in 2014 and 2015 – forced the sale and said there was not enough money raised for minority shareholders to be paid.
However, the founders believe that due to a relaxation of betting laws in the US, the company was significantly undervalued and that their shares are worth more than $120m.
Newly filed accounts for FanDuel reveal that the group of founders are preparing fresh legal action against the firm.
FanDuel’s chief executive Matt King said no contingency had been made on the firm’s balance sheet for the court action which the board felt was unlikely to be successful.
He said: “The group’s (FanDuel’s) Scottish solicitors received intimation that the petitioners had ceased to instruct the legal team which had commenced the proceedings.
“Alternative counsel has been instructed by the petitioners and group’s counsel has been advised that the proceedings raised will not be insisted upon in their current form but that new alternative proceedings will be commenced.
“We understand that the new counsel team for the petitioners is currently framing the alternative proceedings but to date these have not been served on the group.
“No action has been taken meantime to progress the original proceedings.
“While it is possible the case reaches a merits determination, the group does not consider it probable and therefore no accrual has been recorded as of the balance sheet date.”
Mr and Mrs Eccles both resigned from the board of FanDuel in 2017. Mrs Eccles subsequently raised $2.2m to launch an app called Relish which is described as a “personal trainer for relationships”.
The accounts filed at Companies House, for the final full-year before the merger, show the firm recorded a pre-tax loss of $12.6m for the year ending December 31 2017.
The firm’s operating loss fell from $75.7m in 2016 to $36.1m in 2017. Shareholders’ deficit increased from $154.6m to $177.9m during 2017.
Last night Mr Eccles said: “Unfortunately we can’t comment at this time.”