Key Takeaways:
IG Group's $1.1 billion acquisition of Underdog marks the FTSE 100 company's biggest bet yet on the convergence of daily fantasy sports, prediction markets and retail trading in the US.
IG Group Holdings plc agreed to acquire Underdog, a US daily fantasy sports and prediction markets operator, for $1.1 billion upfront with an additional capped earn-out tied to 2026 revenue and positive EBITDA, the London-listed fintech company said Thursday. The deal values Underdog at 2.4 times its $466 million in net revenue for the 12 months through June 2026.
"We built Underdog by creating the best experience for fans, and we've proven we can build the best products no matter how the regulatory landscape shifts," said Jeremy Levine, chief executive officer of Underdog. "Now, with our own exchange and by joining IG, we're going to take an incredible leap in what we can offer customers."
Underdog generated $466 million in net revenue over the past year, up 21% from the prior period, with nearly 1 million monthly active users — a 39% increase. More than 60% of those users are under 30 years old, and more than 80% are under 40, giving IG a customer base that is roughly eight years younger than its standalone average age of 42. Cumulative depositing customers grew from about 14,000 in 2021 to nearly 5 million by the end of 2025.
The acquisition, expected to close in late 2026 or early 2027 pending regulatory and antitrust approvals, would more than double IG's US revenue and increase its US active customers by more than tenfold. On a pro forma 2025 basis, the US would have accounted for about 40% of group revenue, compared with roughly 22% on a standalone basis.
Deal Structure and Financial Impact
The upfront $1.1 billion payment will be funded through new IG equity and debt, initially via a bridge facility before longer-term financing is arranged. IG said it remains committed to retaining its investment-grade credit rating and maintaining its solvency ratio within a 160% to 200% target range. The company will pause its share buyback but maintain its existing dividend policy.
IG expects the deal to be broadly neutral to adjusted earnings per share in the first year, with double-digit percentage accretion by year three. Return on invested capital is expected to exceed the company's weighted average cost of capital in the same timeframe. Pro forma gross leverage is expected to be below two times EBITDA at the end of 2026, with deleveraging thereafter.
Underdog's founders will receive approximately 2% of IG's enlarged share capital upon completion, subject to the longest lockup provisions. Five institutional shareholders will receive roughly 3% in aggregate with faster release schedules, while smaller holders will be largely unrestricted. A separate management incentive plan could pay up to $850 million based on Underdog achieving adjusted EBITDA of $400 million in 2028 and $700 million in 2029.
Prediction Markets as the Growth Engine
Underdog operates a vertically integrated infrastructure stack that includes a futures commission merchant, a CFTC-licensed designated contract market exchange and a derivatives clearing organization — making it one of three fully integrated providers competing in US sports prediction markets, according to IG. The company launched prediction markets in limited form in September 2025, expanded to 30 states and introduced prediction-market parlays in November. In April, it integrated Kalshi into its brokerage, and its own exchange launched in July.
While less than 1% of Underdog's current handle comes from prediction markets, Martin Price, IG's global head of strategic finance and investor relations, said the company expects future activity to be "very largely prediction markets, almost exclusively prediction markets." Underdog is the third-largest US-regulated prediction markets operator by notional volume flow, behind Kalshi and Robinhood, per IG's estimates.
The deal also marks the substantive completion of IG's strategic review, launched in March, which prioritized acquisitions meeting its M&A framework. The company plans to provide refreshed strategy guidance and a capital-allocation framework at an Oct. 22 strategy update. IG separately reported a strong first half, with organic active customers up 13%, organic first trades up 74% and organic total revenue up 17%, alongside an EBITDA margin of 44%.
This article is for informational purposes only and does not constitute investment advice.
