When the European gambling giant bought the Edinburgh-based fantasy sports site earlier this year, it was valued at over $465 million. However, Eccles – who stepped down as CEO six months before the deal – was left out in the dark due to a ‘waterfall’ financial arrangement whereby some of the firm’s earliest investors were paid out.
Current FanDuel executives such as Matt King, who replaced Eccles as Chief Executive, could be set to make millions out of the merger.
FanDuelling in Court
Kurt Wagner at Recode posted a petition submitted to Scotland’s Court of Session, which reads: “The decision of the board (whose interests are aligned with preference shareholders), not to seek and act upon a new market valuation in the face of a material event, which is likely to have significantly increased the market valuation of FanDuel, is a breach of its fiduciary duties.”
Eccles argues that the $465 million valuation was not large enough to ensure that those who owned non-preferred shares made any money from the deal. This, he says, is unfair. Eccles also made the staggering claim that the company was purposefully undervalued to cut both himself and other employees out of money.
He believes the founding team’s shares are worth in excess of $120 million. The former CEO has since gone on to launch Flick, an eSports venture it is hoped could grow to rival Twitch.
A Fanduel spokesperson responded to Eccles claims, telling Recode that the petition “is simply not rooted in facts or reality.”
According to FanDuel, the deal was “consummated consistent with the corporate governance rules and cap table established under the former founder’s leadership. The facts are that this was a sound business transaction that achieved the highest valuation possible for shareholders and was the right strategic move for the company’s future.”
This petition is one of a number of revelations in an ongoing saga that has lasted for years. The company was embroiled in a legal battle in the US after it spent significant sums of money on advertising to compete with a rival product, DraftKings. US regulators suggested this was illegal, as FanDuel should have been considered as sports gambling under US law – this resulted in a lengthy and costly legal battle.
FanDuel and DraftKings agreed upon a merger deal in late 2016, however, once again the firm courted controversy. The deal was blocked by the Federal Trade Commission, which led to the companies abandoning the proposed merger.