IG Group (LON:IGG) said its proposed acquisition of U.S. sports gaming company Underdog would expand its exposure to prediction markets, daily fantasy sports and related products, while increasing the group’s U.S. revenue contribution and customer base.
At a shareholder seminar, Chief Executive Officer Breon Corcoran said the transaction, announced at the end of July, is intended to provide IG with access to a “high-growth adjacent category” spanning daily fantasy sports, prediction markets and other offerings. Underdog Co-Founder and CEO Jeremy Levine and IG Chief Financial Officer Clifford Abrahams also outlined the business’s product, regulatory and financial position.
Underdog reports rapid revenue and customer growth
For the third quarter, Underdog reported net revenue of $105 million, up 118% year over year. Handle per customer increased 165%, average deposits per customer rose 109%, and monthly active customers grew 13%, according to Levine.
He cautioned that the year-over-year comparison benefited partly from the sporting calendar, including World Cup activity during the quarter, and from comparison with an unusually weak margin period in the prior year. Results can also vary based on sports outcomes and player performance, Levine said.
Underdog reduced marketing spending by more than 30% year to date as it rebuilt its product offering during a transition toward prediction markets. Levine said the company is preparing to increase marketing activity during its busiest period, which includes the NFL season and the start of the NBA season.
Prediction-market strategy and product expansion
Underdog’s historical core product was its Pick’em fantasy game, in which customers select multiple player-performance outcomes across different teams. Levine said the structure limited the types of choices available compared with online sports betting, including single selections, team outcomes and same-team player combinations.
The company has since expanded through prediction markets. In July, Underdog launched its own full-stack exchange, UDX. Levine said the company holds the three required U.S. derivatives licenses: a futures commission merchant license, a designated contract market license and a derivatives clearing organization license.
“We are the only sports first operator live with all three,” Levine said.
He said ownership of the full technology and licensing stack enables Underdog to capture economics across more parts of a transaction and provide customers with a single app, account and wallet. The company’s orchestration layer routes orders across venues and regulatory structures, depending on the product and the customer’s location.
Underdog has also introduced new games, including Crash and Rips, and expects to launch a new market type called Supercharge. Levine said early signs of cross-selling between new games and the company’s sports products have been positive, though he did not provide detailed figures.
Regulatory flexibility remains central
Management acknowledged uncertainty surrounding the regulatory treatment of sports prediction markets. Levine said Underdog expects the issue to be largely resolved by the U.S. Supreme Court and believes a final resolution is likely next year.
If federal oversight remains in place, Underdog believes its current exchange structure positions it well, he said. If authority shifts back to states, the company could move sports activity largely back into daily fantasy sports frameworks. Levine said that, if required, the company could make that product configuration change within roughly 30 minutes.
Corcoran said he believes the eventual market structure could be a hybrid model and may involve local taxation, though he stressed that this was his personal view and that the Supreme Court will ultimately determine the legal outcome.
Levine added that Underdog could evaluate expanding into regulated online sports betting if that became the best option for the business.
IG expects greater U.S. scale and diversification
Abrahams said Underdog would more than double IG’s U.S. revenue and increase U.S. monthly active customers by more than tenfold. On a combined basis, the U.S. would account for 41% of group revenue, compared with 19% currently.
Prediction markets and daily fantasy sports would represent 27% of combined group revenue following the transaction, according to Abrahams. He said the acquisition would diversify IG’s product mix and potentially reduce short-term revenue variability because Underdog’s revenue streams are largely uncorrelated with IG’s existing businesses.
The transaction includes $1.1 billion of upfront enterprise value for 100% of Underdog at closing, equivalent to 2.4 times net revenue for the 12 months to June 2026. Sixty percent of the equity value will be settled through 24.1 million newly issued IG shares, with the remaining 40% funded in cash initially through a bridge facility.
An additional earn-out of up to $200 million is tied to 2026 revenue, while a separate management incentive plan depends on Underdog achieving EBITDA targets in 2028 and 2029. Abrahams said the incentive structure is designed so that additional payments occur only if Underdog delivers its targets.
Corcoran said IG views the deal as part of a broader effort to diversify beyond its historical concentration in U.K. over-the-counter contracts for difference and spread-betting products. He said IG will provide a strategy update focused on its existing businesses on October 22.
About IG Group (LON:IGG)
IG Group Holdings plc (“IG”) is a FTSE 100 financial technology company operating at the intersection of retail trading, technology and capital markets. Through its trusted brands – IG, tastytrade, Freetrade and Independent Reserve – the Group serves over 1.3 million customers worldwide, providing leveraged trading, stock trading and investments, and cryptocurrency trading via its proprietary platforms. For more information, visit www.iggroup.com.
