IG Group bets up to $1.3 billion on Underdog and US prediction markets

IG Group Holdings plc has agreed to acquire US daily fantasy sports and prediction markets operator Underdog for total consideration of up to approximately $1.3 billion.

This is a sizeable strategic move. IG expects the acquisition to more than double its US revenues, increase US monthly active customers more than tenfold and establish the group as a leading operator in US prediction markets.

However, the transaction also brings meaningful financial and execution risk. IG will issue new shares, take on additional debt and pause share buybacks while leverage reduces.

Importantly, this RNS replaces an earlier announcement. The correction relates to the committed bridge facility, which is up to $950 million. All other information is unchanged. Investors can read the original company announcement.

The acquisition at a glance

Key figure	Detail
Maximum consideration for Underdog shareholders	Approximately $1.3 billion
Upfront enterprise value	Approximately $1.1 billion
Potential earnout	Approximately $200 million
Expected upfront equity value	Approximately $963 million
Upfront cash payment	Approximately $380 million
New IG shares issued	Approximately 24.1 million
Underdog debt expected to be repaid	Approximately $160 million
Committed bridge facility	Up to $950 million
Separate management incentive plan	Up to $850 million
Expected completion	Late 2026 or early 2027

The maximum $1.3 billion consideration consists of the upfront value and a potential earnout for Underdog's shareholders. The separate management incentive plan, or MIP, is not part of the consideration paid to sellers.

What IG is buying

Founded in 2020, Underdog operates daily fantasy sports, known as DFS, and prediction-market products in the US.

Prediction markets allow customers to trade contracts linked to the outcome of future events. These can cover sport and, potentially, areas such as crypto, financial markets, economic data, culture and politics.

IG says Underdog has become the third-largest US prediction-markets venue by regulated notional volume flow since launching in September 2025, based on internal estimates covering prediction markets and DFS combination trades.

The business has approximately one million average monthly active users, more than five million depositing customers and over 11 million registered accounts. It also owns an integrated regulatory and market-infrastructure stack covering brokerage, exchange and clearing functions.

That infrastructure matters because it could allow the enlarged group to retain more of the economics generated across each transaction, rather than relying entirely on third-party providers.

Underdog's recent financial performance

Underdog reported approximately $466 million of net revenue for the 12 months ended 30 June 2026, up 21% from $380 million in the equivalent prior period.

For the three months to 30 June 2026, it generated approximately $122 million of net revenue and $46 million of EBITDA. EBITDA is earnings before interest, tax, depreciation and amortisation, and is commonly used to assess underlying operating performance.

Underdog performance	2023	2024	2025	H1 2026
Net revenue	$151.4 million	$271.2 million	$441.2 million	$250.1 million
EBITDA	$(55.5) million	$(60.3) million	$(52.8) million	$59.6 million
Average monthly active users	320,200	577,800	835,700	952,500
Cumulative depositing customers	1.6 million	3.1 million	4.9 million	5.5 million

The direction of travel is encouraging, with rapid revenue and customer growth followed by positive EBITDA in the first half of 2026. Nevertheless, the historical losses show that this profitability record remains relatively short.

The financial information relating to Underdog is based on management information and is unaudited.

How IG will fund the deal

IG expects to issue approximately 24.1 million new ordinary shares, representing around 6.8% of its enlarged issued share capital. These shares will fund 60% of the expected upfront equity value.

The remaining upfront amount includes an expected cash payment of approximately $380 million, subject to adjustments. IG also expects to repay approximately $160 million of Underdog's existing debt.

A bridge facility of up to $950 million has been committed by Barclays Bank and Goldman Sachs International. This figure is the subject of the corrected announcement.

Pro forma gross leverage is expected to remain below 2.0 times at the end of 2026 and reduce thereafter. IG also expects its solvency ratio to remain within its 160% to 200% target range.

The trade-off is that share buybacks have been paused. IG expects to be positioned to resume them in 2027, although that depends on completing its redomicile, share-price performance and other demands on capital. Its progressive ordinary dividend policy is unchanged.

Why IG believes the acquisition can work

The strategic logic rests on scale, customer acquisition and cross-selling.

On a pro forma basis using 2025 results, the US would have represented approximately 40% of group revenue, compared with 22% for standalone IG. Prediction markets and DFS would have accounted for approximately 25% of combined total net trading revenue.

IG hopes Underdog's sports-focused customers can be introduced to active trading and financial derivatives through tastytrade in the US and IG's international platform. It also points to potential infrastructure and product-development benefits.

Underdog will retain its brand, management team and operational platform. Keeping it commercially standalone may protect its entrepreneurial culture, although it also means the benefits will depend heavily on successful cooperation between separate businesses.

The earnings targets are attractive but not guaranteed

IG expects the acquisition to be broadly neutral to adjusted earnings per share in year one and double-digit percentage accretive by year three. It also expects the return on invested capital to exceed its weighted average cost of capital in year three.

These are management expectations rather than guarantees.

The earnout of up to approximately $200 million depends on Underdog achieving positive EBITDA in 2026 and meeting net gaming revenue targets. Separately, the MIP can pay out as much as $850 million, but the maximum requires EBITDA of at least $400 million in 2028 and $700 million in 2029.

The MIP is intended to be self-funded from Underdog's earnings. Even so, its scale is significant and deserves attention because cash payments could affect how much value ultimately flows to IG shareholders.

What could go wrong?

The first concern is regulatory risk. Completion requires relevant US approvals, including clearance under the Hart-Scott-Rodino antitrust process. The wider regulatory environment for prediction markets and daily fantasy sports is also evolving.

Second, IG is paying approximately 2.4 times Underdog's net revenue for the 12 months to June 2026. Whether that proves attractive will depend on sustained growth and the conversion of recent EBITDA profitability into durable cash generation.

Third, existing shareholders face dilution of approximately 6.8% on completion. Higher leverage and the pause in buybacks add further near-term pressure on capital returns.

Investors should also note that IG chief executive Breon Corcoran owns approximately 0.34% of Underdog's fully diluted share capital through preferred shares and options acquired before joining IG. The board approved his involvement in negotiations, but he recused himself from the formal approval of the transaction.

The key milestones for IG shareholders

This acquisition could materially reshape IG, giving it a much larger US customer base and exposure to a rapidly expanding product category. Underdog's recent revenue growth, improving profitability and integrated licences provide a credible strategic case.

The price is substantial, though, and the benefits rely on regulatory approval, continued customer growth and demanding future earnings targets. Investors should watch the completion timetable, Underdog's 2026 performance, leverage reduction and whether IG can deliver cross-selling without weakening either brand.

Completion is expected in late 2026 or early 2027. IG plans to provide more detail on its refreshed strategy, capital-allocation framework and guidance at its Strategy Update on 22 October 2026.