IG Group to Acquire Underdog in $1.1B U.S. Prediction Markets Push

Key Points

• IG Group agreed to acquire Underdog for $1.1 billion upfront, with an additional capped earn-out tied to 2026 revenue and positive EBITDA. Closing is expected in late 2026 or early 2027, pending regulatory and antitrust approvals.
• Underdog would significantly expand IG’s U.S. footprint, more than doubling U.S. revenue and increasing U.S. active customers by over tenfold. Its younger, mobile-focused base includes nearly 1 million monthly active users, with more than 60% under age 30.
• IG expects the deal to be broadly neutral to adjusted EPS in the first year but deliver double-digit percentage accretion by year three. The company will fund the transaction with new equity and debt, pause its share buyback, and maintain its investment-grade rating and existing dividend policy.

IG Group LON: IGG said it has agreed to acquire U.S. daily fantasy sports and prediction markets operator Underdog in a transaction designed to expand its presence in the U.S. consumer finance market and add a younger, mobile-focused customer base.

The company described Underdog as a high-growth adjacent business spanning daily fantasy sports, or DFS, and prediction markets. IG said the acquisition was identified through the strategic review it launched in March, which prioritized acquisitions that met its M&A framework.

Management said the deal is structured with a substantial portion of consideration tied to future performance, reflecting the risks associated with the fast-moving regulatory environment for prediction markets. Closing is expected in late 2026 or early 2027, subject to regulatory and antitrust approvals.

Underdog's Platform and Customer Growth

Underdog operates a vertically integrated infrastructure stack that includes a futures commission merchant, or brokerage; a CFTC-licensed designated contract market exchange; and a derivatives clearing organization. IG said those capabilities provide control over product design, economics and risk management across DFS and prediction markets.

The company said Underdog is one of three fully vertically integrated providers competing meaningfully in sports prediction markets. It launched prediction markets in limited form in September 2025, expanded to 30 states and introduced prediction-market parlays in November. In April, Underdog integrated Kalshi into its brokerage, providing access to a broader range of contracts, while its own exchange launched in July.

Underdog generated $466 million in net revenue for the 12 months ended June 2026, up 21% from the prior period, according to IG. The business had nearly 1 million monthly active users, up 39%, and reported that average monthly handle per active customer increased by more than 50% year over year in the second quarter of 2026. Monthly active users rose by more than 60% during that quarter.

Management said cumulative depositing customers grew from slightly more than 14,000 in 2021 to just under 5 million at the end of 2025, while active annual customers increased to 3.2 million from 14,000. More than 60% of Underdog’s monthly active users are under 30 years old, and more than 80% are under 40, IG said.

In response to an analyst question, management said less than 1% of Underdog’s current handle comes from prediction markets. However, 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.”

Transaction Terms and Expected Financial Impact

Clifford Abrahams, IG’s chief financial officer, said the deal includes a fixed $1.1 billion upfront payment, representing an enterprise value of 2.4 times Underdog’s net revenue for the 12 months through June 2026. The transaction also includes a capped earn-out tied to 2026 revenue and positive EBITDA.

A separate management incentive plan will reward eligible employees based on EBITDA delivery in 2028 and 2029. Abrahams said the plan sits outside the purchase price and will be funded by Underdog’s earnings.

• IG expects the acquisition to be broadly neutral to adjusted earnings per share in the first year.
• The company expects double-digit percentage adjusted EPS accretion by year three.
• IG expects return on invested capital to exceed its weighted average cost of capital in year three.
• Pro forma gross leverage is expected to be below two times EBITDA at the end of 2026, with deleveraging thereafter.

The acquisition will be funded through new IG equity and debt, initially including a bridge facility before longer-term financing is arranged. Abrahams said IG remains committed to retaining its investment-grade credit rating and maintaining its solvency ratio within a 160% to 200% target range.

Underdog’s founders are set to 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.

Expanded U.S. Presence

Abrahams said Underdog would more than double IG’s U.S. revenue and increase U.S. active customers by more than tenfold. On a pro forma 2025 basis, the U.S. would have accounted for about 40% of group revenue, compared with approximately 22% on a standalone basis.

He added that DFS and prediction markets would have represented 25% of combined 2025 revenue, while the pro forma average customer age would decline to about 34 from roughly 42 for IG on a standalone basis.

IG said Underdog will operate as a commercially standalone business, while the group sees opportunities to scale its products through tastytrade in the U.S. Management also cited potential longer-term opportunities to offer products internationally through IG’s existing licenses.

Strategic Review and Half-Year Update

IG said the acquisition, its proposed parent-company redomicile to Jersey and a refreshed organizational model mean the strategic review launched in March is now substantively complete. The company plans to provide refreshed strategy guidance and a capital-allocation framework at an Oct. 22 strategy update.

Separately, IG reported a strong first half, with organic active customers up 13% and organic first trades up 74%. Organic total revenue increased 17%, while organic net trading revenue grew 20%. The company reported a first-half EBITDA margin of 44%.

IG said its standalone guidance remains unchanged and continues to target organic total revenue growth of at least 10% annually beyond 2026, based on its approximately £1.1 billion 2025 revenue base. Its dividend policy is unchanged, though the company intends to pause its current share buyback and expects to consider resuming it in 2027 following completion of the redomicile, subject to share-price performance and other capital demands.

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.

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