Auditor’s Alarming Find: FanDuel Hemorrhaging Cash
Auditors looking at the financials of daily fantasy sports operator FanDuel are finding that the company is losing money at an alarming rate. Their findings are just the latest in a string of bad news reports that have dogged the once high flying sports operator.
According to published reports on insider.co.uk and CalvinAyre.com, auditors from Deloitte Touche found that FanDuel lost $186 million the two quarters leading up to December 2015. These losses are believed to be the result of exploding legal expenses that came on top of massive marketing expenses. (Americans may recall the heady fall of 2015 when FanDuel and DraftKings advertising blanketed the country across all forms of media.)
Unfortunately for FanDuel, and DraftKings, bringing daily fantasy sports to the world has been incredibly difficult and shockingly expensive. For example, during the period in question, FanDuel saw a gross profit around $49.8 million. That profit didn’t come close to covering the $336.3 million in administrative costs the company saw during that same period.
One of the biggest drains on FanDuel’s resources is paying lawyers who are battling on the company’s behalf across the country. Ever since an insider trading scandal rocked the company, and the daily fantasy sports world in the fall of 2015, the company has been fighting for its legal life in almost every US state. As of this writing, only 16 states have formally legalized daily fantasy sports.
Adding to FanDuel’s headaches is the fact that US trade regulators slammed the brakes on the company’s plans to merge with rival DFS operator DraftKings. That partnership would have made life easier for both companies, but now both are forced to go it alone. In FanDuel’s case, life on its own is something that’s proving easier said than done.