PrizePicks has recently hired a major investment banker known for getting big deals done. Could this be in anticipation of a new acquisition for the DFS giant or is it positioning itself for a merger?
DFS Operator or Sportsbook?
PrizePicks has hired a big name in investment banking to explore possible mergers or acquisitions. Moelis & Co. navigated the merger between Sprint and T-Mobile while also negotiating the sale of MGM Resorts’ Bellagio Hotel and Casino to Blackstone Inc. for $4.25 billion. This could signal the company’s motivation to acquire or be acquired by a competitor.
PrizePicks is an Atlanta, Georgia-based DFS company renowned for its “pick’em” contests and is available to those age 19 and older in 33 states as well as Washington DC. The company has run into legal problems in several states as it operates as a pseudo-mobile sports betting company without being classified as such due to the tournament nature of its offerings and the absence of single-event wagering.
However, users can build parlay-style bets by picking a series of prop bets consisting of over/under choices on various sports like touchdown passes, rushing yards, points scored, etc. Due to the similarity of these offerings with prop bets available at sportsbooks that pay much higher licensing fees and tax rates, the company operates in many states in an obscure legal gray area. In contrast, other states, like Michigan, have banned it entirely causing the company to shutter operations in the Great Lakes State.
Attractive Seller?
Because of its status as a DFS operator and not a sportsbook, those states that have yet to adopt sports betting generally allow it to operate in those areas. And some of those states like Texas and California are the holy grail for sportsbooks due to their abundant population, boasting the highest number of citizens in the nation with over 30.5 million and nearly 40 million, respectively. By contrast, New York, the nation’s biggest sports betting market, ranks No. 4 in population with 19.5 million people.
The fact that PrizePicks is gaining traction with its relatively unique product for DFS fans is evident as its downloads increased by 64% last football season, generating 3.2 million users ahead of Super Bowl 58. Continuing to cultivate the biggest markets in California and Texas gives the company a growing database of easily convertible DFS players to sportsbook users when the time arrives.
An industry source recently commented on PrizePicks’ hiring of Moelis & Co., saying, “It’s not surprising that this is coming out that they’re looking to do something. It just feels like for a while now it’s what’s the ultimate endgame for PrizePicks, some of these if you want to call them grey-market companies in some of these states.
“If you’re looking for an advantage into essentially the biggest goldmine left for sports betting, where would you want to go to, you’re going to want to turn to your DFS product.”
Established Giants
A mature database is the reason why FanDuel and DraftKings are the nation’s leading mobile sportsbooks as they were both DFS companies before they converted many of those customers to sports bettors immediately after PASPA was struck down in 2018, paving the way for legal sports betting in the United States.
PrizePicks is doing the same in areas where sports betting hasn’t been passed and it could make it an attractive target once those markets become available. FanDuel and DraftKings would be eager to poach those lists and the best way to do it is to buy the company that has them…PrizePicks.
