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PrizePicks, a provider of daily fantasy sports (DFS), has mostly switched to a player vs. player (PVP) business model. This move allows the company to maintain access to some of the biggest states and may make it a target for a takeover.
PrizePicks "has pursued that PVP change more rigorously than rivals—possibly in an attempt to make itself an attractive merger and acquisition target," according to a research released Wednesday by Eilers & Krejcik Gaming (EKG). A significant difference at a time when some states, like California, are cracking down on player versus. house DFS games is that under the PVP model, DFS participants compete against one another rather than the house.
PrizePick's decision to switch to the PVP format was wise because several state regulators have increased their scrutiny of the original DFS model, suggesting it is just another type of sports betting.
"The operator now offers player vs player (PVP) formats to ~55% of the US,” notes EKG. “Newer PVP formats like PrizePicks Arena put customer selections into a tournament structure, with top scorers getting paid out.”
Only three states presently provide player vs. house DFS, according to the research firm: North Carolina, Texas, and Virginia.
PrizePicks Transferring from Buyer to Seller?
Because the operator and several of its competitors were able to acquire business from DraftKings and FanDuel, the pioneers of the DFS sector, PrizePicks claims to be the biggest DFS company in North America.
One intriguing aspect of the EKG rumor is that PrizePicks just over a year ago hired investment bank Moelis & Co. to assess prospective acquisitions for the business, suggesting that it may be going quickly from buyer to seller.
Although the research firm did not name individual businesses that might be interested in purchasing PrizePicks, it did refer to possible suitors as "online gambling operators" and stated that "listed firms" are seeking expansion.
That makes sense given that sports betting is illegal in large states like Georgia, Texas, and California, and that Hard Rock controls a sports betting monopoly in Florida. If the business keeps access to the most desirable states, that can indicate interest in PrizePicks.
PrizePicks' Underdog Valuation Could Serve as a Model
PrizePicks and its potential suitors may find it instructive given its rival, Underdog Fantasy, was valued at $1.23 billion after a $70 million investment round in March.
According to EKG, the multiple on PrizePicks might reach $2 billion as a result of the Underdog value, which would probably be acceptable to a wide range of suitors.
Former NBA player Andrew Bogut, former Atlanta Braves star Andruw Jones, and poker great Phil Hellmuth are among the investors of Atlanta-based PrizePicks. Phoenix Capital Ventures and Parlay Capital Holdings are two of the company's professional investors.
