A FanDuel IPO could be one of the largest initial public offerings of 2016, as the daily fantasy sports company is now valued at roughly $1.3 billion.
FanDuel has now raised $363 million since its 2009 founding, with the most recent round of funding coming in July 2015.
The New York-based company hosts one-day or one-week fantasy sports tournaments. That's different from many traditional fantasy sports, which require a season-long commitment.
The website also allows customers to wager real money online, which is the biggest selling point for the company.
This wagering is not viewed as "gambling" by U.S. regulators because fantasy sports are considered to be "games of skill." Regulators claim fantasy sports require a level of knowledge regarding professional and collegiate sports that traditional gambling does not.
Customers can wager various amounts on different tournaments, starting as low as $1. The company says it plans to pay out $400 million in prizes in 2015 to its top players.
The company hosts tournaments dealing with the NFL, MLB, NBA, NHL, and various college sports.
FanDuel takes a percentage of every wager placed on its site, and CEO Nigel Eccles has previously said that the company became profitable for the first time in Q4 2014. The company has remained silent on its total revenue, however.
While Eccles has not provided any specifics on a FanDuel IPO date, he has said that one could take place within two to three years.
However, executives typically play coy when it comes to the timing of IPOs, and with a value north of $1 billion, a 2016 FanDuel IPO is absolutely possible.
If you think you've been hearing more lately about daily fantasy sports sites like FanDuel and competitor DraftKings, you are probably right. Since Aug. 1, FanDuel has spent $20 million on television advertising. DraftKings has spent four times that, dropping $81 million on TV ads since the beginning of August.
FanDuel is building its brand and customer base - but will that be enough to be a good investment when its stock starts trading?
Should I Invest in the FanDuel IPO?
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Because of its growing popularity, it's a total possibility that FanDuel stock will climb higher following the FanDuel IPO.
But at Money Morning, we recommend waiting several quarters after an initial public offering before investing.
You see, IPOs only benefit institutional investors like hedge fund managers and investment banks that are willing to buy large quantities of a stock before its debut. These Wall Street "VIPs" buy in at a very low price, much lower than you or I.
Retail investors like us can only buy in once the stock begins trading. And if there is high demand when the stock hits the market, we end up paying an immediate premium. When the price falls back down to Earth, which it almost always does, retail investors are looking at a hefty loss.
By waiting several quarters, you'll not only sidestep much of FanDuel stock's early volatility, but you'll also have a better grasp of the company's financial growth.
But according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, there are still a few ways to profit from a hot new stock like FanDuel.
Here are the three best ways to play the exciting IPO market...
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