FanDuel Co-Founder To Sue After Not Receiving a Penny From Paddy Power Betfair Merger
The acquisition of daily fantasy sports company FanDuel by Paddy Power Betfair for $465m this year should have translated into major money going to the founders. This however was not the case and FanDuel founder Nigel Eccles who founded the company in 2009 is seeking legal action to remedy this.
Eccles who stepped down as CEO about six months before the acquisition did not get a single penny from the deal. In terms of the acquisition there was some creative “financial arrangements” in place which resulted people who owned non-preferred shares like regular employees and founders not getting any financial benefits from the acquisition.
Eccles understandably believes that this arrangement was unfair and goes on to claim that FanDuel was purposely undervalued in the deal in order to cut him and other employees out of the money. Eccles filed a petition in the Scottish Civil Court in conjunction with FanDuel’s other three co-founders demanding that the company be revalued. He believes that the three founding members cumulative shares are worth over $120m.
To add insult to injury, the current CEO of FanDuel Matt King is expected to cash in on the merger deal. The petition goes on to say that,” 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.”
Unsurprising a FanDuel Spokesperson rejected the claims and said,” The petition is simply not rooted in facts or reality. In preparation for this deal, an exhaustive process was undertaken with the anticipation of PASPA’s likely repeal. The deal was consummated consistent with the corporate governance rules and cap table established under the former founders’ 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.”