Deloitte: FanDuel future in âsignificant doubtâ
Auditor cites regulatory concerns as high risk but operator confident it can operate for at least 12 more months
Ongoing regulatory struggles in the US has placed FanDuelâs future in âsignificant doubtâ, leading accountancy firm Deloitte has warned.
In FanDuelâs most recent financial report, which revealed the firm lost $77.8m in the 18 months to June 30, auditor Deloitte questioned the companyâs ability to weather these kind of losses in the long term.
Around 25% of the US population are unable to play DFS, with FanDuel and rivals DraftKings forced to suspend operations in New York, Texas and Nevada among others.
âIt is possible that the number of states where the state attorney general may issue opinions against the groupâs activities could expand and the groupâs activities could be determined to be unlawful and prohibited from operating,â James Boyle, Deloitte senior statutory authority, wrote.
âThe potential for such an outcome represent a material uncertainty that casts a significant doubt upon the group and the companyâs ability to continue as a going concern.â
The company reported the near $78m loss despite record turnover of $87.7m. The company attributed the losses to heavy investment in product development and TV advertising, running its cash balance down from $274m to $47.8m.
Despite the financial performance and Deloitteâs assessment of the regulatory environment, the company was confident it could keep operating for at least another year.
âGiven the controllable nature of the groupâs marketing and developments costs⦠the groupâs current cash position should provide adequate funding to continue as a going concern for at least 12 months from the date of the report,â the directors wrote.
âThe directors believe that the investment strategy undertaken during the period will drive the future success and growth of the group with due consideration of the ongoing litigation issues,â said the firm.
The current business model of the big two DFS companies has been widely criticised for being unsustainable once taxes and incensing fees are imposed.
Joe Brennan, the CEO of FastFantasy, a B2B DFS platform provider, told EGR NA: âThe current DFS model is not the answer.
âThe states have seen all these adverts and now they want their cut. But the difficulty is that the two main companies arenât really profitable. Their money comes from venture capital, but the amount of money they hold onto is a lot less than you would imagine.
âPeople like to compare it poker and claim it will get more profitable as it scales but you can play 20 hands of poker in an hour while thereâs a limited number of sports events going on,â he added.