FanDuel Founders and Investors Fight to Keep Sale Lawsuit Alive

The plaintiffs argue that the defendants’ Motion to Dismiss fails to present any new arguments and merely reiterates points that the court has already rejectedImage Source: Shutterstock.com

The founders of FanDuel, plus over 100 early investors and workers, are trying to keep their lawsuit going in the New York Supreme Court. 

Lawsuit Claims Private Equity Firms Exploited FanDuel Sale

They are suing private equity firms Shamrock Capital Advisorsand KKR. The case is about the $559 million saleof FanDuelto Paddy Power Betfairin 2018. The people suing say this deal was not fair because it left them out of the profits while making a lot of money for big investors with special shares. 

The merger happened just before PASPAwas canceled. PASPAwas a law that did not allow sports betting in most US states. The plaintiffs think this timing let the big shareholders make a lot of money as FanDuelbecame a leader in the legal sports betting business.

The plaintiffssay the company’s value was lowered during the sale leaving common shareholders with no payout. This lower valuation, they claim aimed to give all the equity to preferred shareholders. They say private equity firms Shamrockand KKRgained too much, with KKRmaking $250 millionand Shamrock $100 millionin the years after the sale. By 2020, FanDuel was worth over $20 billion, which backs up the plaintiffs’ belief that the merger was meant to exclude them from the company’s success afterPASPA.

Court Allows FanDuel Merger Claims to Proceed

In May, New York’s Court of Appealsdecided that the plaintiffs had alleged enough to show a breach of fiduciary duties under Scots law, which controls the dispute.

The plaintiffs filed a Second Amended Complaintbacked up by more evidence they had obtained during the discovery. They say that the defendants’ Motion to Dismiss — which they filed earlier this year — does not bring up any new arguments and just goes over points the court already turned down.

The defendantsclaim the sale was needed to rescue FanDuelfrom going broke saying the company struggledunder its founder Nigel Eccles’ leadership.

They say the plaintiffstwist facts and papers to make the merger look like a planned betrayalof regular shareholders. Lawyers for the defendants say the plaintiffs’ claims are guesswork without proof calling the lawsuit an attempt to change the past.If the plaintiffsstop the case from being thrown out, it will go to trial.

This would lead to a full examination of one of the gambling world’s most disputed mergers. The trial could affect many people, not just those involved, but also how companies handle mergers and buyouts in general.