Investing in Fantasy Sports Stocks

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Excitement over fantasy sports is growing among sports fans. What options do investors have when looking at fantasy sports stocks?

When sports writer Daniel Okrent invented Rotisserie League Baseball in 1979, it’s unlikely that the “father of fantasy sports” could have imagined it would evolve into an US$8 billion market.

Of course, much of that growth can be attributed to advancements in technology. Fantasy sports magazines published in the late 1980s became websites in the 1990s, and eventually fantasy sports businesses; more recently there’s been a boom in fantasy sports apps for smartphones.

North America currently represents the largest market for fantasy sports services. Research and Markets estimates that more than 59 million people in the US and Canada play fantasy sports. However, India is set to experience significant market growth in the near-term future, with expectations that players will rise from 20 million in 2018/2019 to a projected 150 million by 2022.

The main growth drivers in the fantasy sports market are rising internet, 5G and smartphone use globally, as well as advancements in fantasy gaming mobile apps that allow players to compete with other sports fans and win cash prizes. An additional factor positively impacting this market, according to Research and Markets, is the “growing use of fantasy sports gaming apps for brand promotion.”

Included in that growth is a rising interest in investing in fantasy sports stocks. While it’s still a relatively small market, that could be poised to change given the fantasy sports boom over the last several years.

Fantasy sports stocks: Key public players

While most fantasy sports companies are private or under the umbrella of related publicly traded companies, public fantasy sports stocks do exist. Well-known options include:

  • Playgon Games (TSXV:DEAL,OTCQB:PLGNF): Playgon Games’ initial focus was the daily fantasy sports industry, but it has since grown to encompass a much wider swath of the gaming market. In addition to daily fantasy sports, the software-as-a-service company’s platform includes live dealer casino and e-table games. Playgon’s success earned it a spot on 2021’s TSX Venture 50 list, an annual list of top-performing companies.
  • Score Media and Gaming (TSX:SCR,NASDAQ:SCR): This digital sports media company connects fans to their favorite sports over its mobile platforms. theScore is a mobile app that delivers news, scores, stats and notifications for a variety of sports, while theScore Esports produces and shares original video content, including features and documentaries on high-profile teams as well as highlights and interviews. theScore Bet is a mobile sports betting platform, and theScore.com is a web platform that provides sports news, scores and video and editorial content.
  • DraftKings (NASDAQ:DKNG): DraftKings allows fans in North America and the UK to compete in single day online fantasy sports contests associated with a variety of professional sports. It is an exclusive partner of Major League Baseball, Major League Soccer, the National Hockey League and NASCAR. The company went public in 2020 with a US$1.6 billion initial public offering (IPO).

Fantasy sports stocks: Private options

As mentioned, the number of publicly traded fantasy sports stocks is fairly limited. That said, there are private fantasy sports companies that investors can keep an eye on, such as:

  • FanDuel: Founded in 2009, FanDuel focuses on fantasy football, baseball, hockey and basketball. It allows players to draft fantasy sports teams at any time and play in head-to-head or multi-player contests. The company has been majority owned (95 percent) by Flutter Entertainment (LSE:FLTR,OTC Pink:PDYPF) since a US$4.2 billion deal in late 2020.
  • Mobile Premier League: This fantasy sports company is India’s largest mobile gaming platform with over 60 million users. In India, fantasy sports players follow live sports in leagues such as the Indian Premier League, English Premier League and the National Basketball Association. The company has also expanded into Indonesia.
  • Dream 11: Another India-based company, Dream11’s fantasy sports app allows users to play fantasy cricket, hockey, football, kabaddi and basketball for cash prizes.
  • PlayOn: This UK-based daily fantasy sports provider offers cash prizes across a variety of sports, including soccer, Formula 1, American football, hockey, tennis, cricket, rugby, basketball and golf.

Fantasy sports stocks: IPOs ahead?

Looking to the future, there’s certainly plenty of room for growth in the fantasy sports stocks industry.

FanDuel’s executives announced in early 2021 that the company was considering an IPO in the coming months. However, in May, CEO Matt King surprisingly stepped down, leaving the prospect of an IPO up in the air. Soon after, FanDuel announced a deal with the Associated Press that will see the company become the official betting partner and lines provider of the news agency’s worldwide sports coverage.

Dream11 parent company Dream Sports is considering a US$1.5 billion US listing in 2022. In March, Dream11 raised US$400 million in secondary investments from Silicon Valley-based TCV as well as D1 Capital Partners and Falcon Edge. In 2019, Dream11 became India’s first gaming startup to attain unicorn status (over US$1 billion valuation).

While no IPO is on the horizon for Mobile Premier League, the company is on its way to becoming India’s next gaming startup unicorn. In April 2021, news hit that Mobile Premier League is courting new and previous investors for another round of funding that could be worth as much as US$150 million, to add to its current US$945 million valuation. If DST Global decides to invest in this funding round, Mobile Premier League could be looking at a US$2 billion valuation.

These companies are just a few possible avenues for investors interested in fantasy sports stocks. With the number of people playing fantasy sports increasing at a rapid rate, it’s a market worth watching.

This is an updated version of an article first published by the Investing News Network in 2017. 

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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