FanDuel along with DraftKings, are two of the biggest Daily Fantasy Sports providers in the United States and dominate the majority of the DFS market. The Scottish based company was founded in 2009 and since then has grown exponentially and is now estimated to be worth more than $1 billion.
The DFS industry has taken a lot of heat from a number of states in American during the past 6 months as the attorney generals have gone after DFS providers such as FanDuel and DraftKings, stating that their DFS games are similar to casino games as they are based on chance and not skill. New York, Nevada, Idaho and Texas are some of the states that have come down on the DFS industry and want DFS providers to obtain a gambling license to offer DFS cash games.
New York stopped FanDuel from offering paid cash games from March 21st and Texas from May 1st. The company is also in the process of reaching an agreement with the attorney general from smaller states where FanDuel would agree to stop offering DFS cash games in exchange for not being sued for offering paid cash games in the past.
The company had reported strong revenue amounting to $87.7 million ending June 30 2015 but its pre-tax losses were extremely high amounting to $94.9 million. FanDuel’s pre-tax losses from its previous report was only $11.3 million. The biggest concern was the company’ financial reserves which fell from $274 million to $47.8 million as of June 30 2015.
FanDuel stated that the significant drop in its financial reserves was due to its decision to focus heavily on its product development and marketing strategy and partly to the losses it has incurred. The company grew from 57 employees in 2013 to having more than 230 employees now and its active player database had grown significantly to 1.25 million players as of June 30.
The Deloitte auditor for FanDuel expressed his concern over the shrinking revenue of the company and the current DFS market conditions in the United States.
In a statement, the auditor said “It is possible that the number of states where the state attorney general may issue opinions against the group’s activities could expand and the group’s activities could be determined to be unlawful in those states and therefore prohibited from operating. The potential for such an outcome represents a material uncertainty that casts significant doubt upon the group and the company’s ability to continue as a going concern.”
However those concerns were played down by FanDuel co-founder and chief executive Nigel Eccles who stated that the states that have asked FanDuel to suspend operations amount to less than twenty percent of the company’s turnover during the 18 month period ending June 30 2015.