Kenneth Dart, the Michigan native who first surfaced on Flutter Entertainment’s share register last September, has built a reputation over decades of buying up chips when most are leaving the table.
An heir to Dart Container Corporation, one of the world’s largest manufacturers of polystyrene cups with annual sales of about $3 billion, the reclusive 71-year-old began investing in distressed Brazilian sovereign bonds in the early 1990s at deep discounts, around the time he moved to the Cayman Islands. He ultimately made hundreds of millions of dollars from a 1996 settlement with the Brazilian government – after resorting to a legal challenge in New York, where the bonds were governed, to challenge Brasilia’s initial debt restructuring terms.
Dart would adopt a similar strategy in Argentina, snapping up a chunk of the country’s debt for cents on the dollar after it defaulted in 2001. Dart and other holdout investors – also including, most famously, hedge fund Elliott Investment Management – received a lucrative pay-day when a deal was finally reached in 2016, after years of litigation.
The blueprint was taken to Europe during the euro-zone debt crisis. Dart was among a group of buyers of Greek bonds that refused to take part in a 2012 debt restructuring essentially imposed by the bailout troika – the International Monetary Fund, European Central Bank and European Commission – to avoid a sovereign bankruptcy. He received 90 per cent of a €436 million payment that Greece made that May to a group of holdout bondholders to make them whole and avert an outright default, according to a New York Times report at the time.
“By accumulating the bulk of these bonds at prices that traders estimate to be from 60 to 70 cents on the dollar, Dart stands to make a hefty profit, having received 100 cents on the dollar – an outcome likely to be especially galling to the Greek banks and other local institutions that were forced to take a 75 per cent loss on their Greek bond holdings,” the report said.
He is also the largest shareholder in Evolution, a Swedish online casino tech company, and in recent years has amassed big stakes in tobacco giants British American Tobacco and Imperial Brands, defying an ethical exodus from such companies.
Estimated by Bloomberg to be worth $11 billion, Dart turned his sights last year to Flutter Entertainment, the Irish gambling giant that traces its roots back to the 1998 merger between three bookmakers – Stewart Kenny, David Power and John Corcoran – who combined their betting shops around the State to form Paddy Power.
[ Foam-cup heir nears 30% Flutter stake but expected to avoid mandatory bidOpens in new window ]
Flutter’s stock soared more than 200 per cent between May 2018 – when the company bought a controlling stake in FanDuel, the US’s biggest online sports betting company – and last August. But they had already started to decline by the time Dart revealed in a regulatory filing that he had amassed an initial 5 per cent stake.
Shares in Flutter have fallen by as much as 68 per cent since then, driven by FanDuel, which is coming under mounting competitive pressure from prediction markets.
While quickly-growing prediction market operators such as Kalshi and Polymarket allow punters bet against each other on everything from when traffic will return to normal at the Strait of Hormuz to attendees at Taylor Swift and Travis Kelce’s wedding, most of their revenues come from sports betting. FanDuel and rival DraftKings have each since got into the predictions market, but they are behind the curve.
Flutter chief executive Peter Jackson has repeatedly insisted the group has seen “limited cannibalisation” from prediction market operators on FanDuel’s sports book. However, Morgan Stanley estimates Kalshi’s share of the US sports betting market has jumped from 1 per cent to more than 10 per cent since last summer.
Flutter has other problems too, such as regulatory changes affecting its international business – including a jump in UK gambling taxes, which took effect April, and a ban on money-based online games in India.
If Jackson was attempting to display decisive leadership in early May by announcing that then FanDuel boss Amy Howe was leaving – making clear the decision was not hers – and replacing her with the business’s president, Christian Genetski, it has failed to win over investors. The stock has drifted ever since.
Almost 8.6 per cent of voting shareholders at the group’s annual general meeting, weeks after the shuffle, cast ballots against Jackson’s own re-election – ignoring recommendations of proxy advisory companies that steer the voting patterns of big institutional investors.
Dart’s total stake now stands at almost 29.6 per cent, within a whisker of breaching the 29.9 per cent level that would ordinarily force a shareholder to make a bid for the entire company under Irish takeover rules. However, 10.7 percentage points of his interest is by way of financial derivatives called cash-settled equity swaps, which do not have voting rights and are normally not counted by the takeover panel.
Dart is sitting on at least $3.66 billion of paper losses on his investment, according to Irish Times calculations. These estimates are based on the lowest possible prices at which he could have bought shares and entered swap contracts in the periods between his stake disclosures.
Some market participants are concerned that investment banks involved in the swap transactions may be earning additional returns by lending out the shares they would otherwise have purchased to hedge their positions, providing them to hedge funds that are short-selling – or effectively betting on the stock price falling.
Flutter short sellers have a total position equivalent to almost 8.5 per cent of the stock as of mid-June, up from 2.5 per cent last August, according to the latest figures from the US Financial Industry Regulatory Authority.
The impact of the short sellers is amplified at Flutter by the fact that about 60 per cent of its ordinary shares are tightly held by five investors, including Dart, limiting the amount of stock available for trading.
Still, fewer willing buyers and more short sellers have delivered something of a silver lining for Dart: gradually pulling down the average price at which the veteran contrarian has been buying.
If he liked the shares at almost $300, he’s surely loving them at about $100. Right?
