PointsBet to Sell and Exit US Market

PointsBet

The world of online betting is always expanding and new betting sites are always emerging. The oversaturated market has caused much concern for smaller operators like PointsBet. Despite efforts to cut costs and provide bettors with an amazing betting experience, the company has decided to sell off the US operations due to low revenue and the crowded sportsbook landscape. PointsBet has been successful in multiple US states, but with more people engaging in sports betting, the larger companies are attracting the business. It has become increasingly difficult for PointsBet to compete with operators like DraftKings and FanDuel.

To help with the sale of operations, PointsBet has hired a New York investment bank to facilitate the sale. With a working relationship with Moelis & Co. PointsBet is hopeful they will find a suitable buyer while continuing to provide services for existing users. The goal is to maximize shareholder value and the company is already having discussions with multiple parties that have shown interest in the purchase. Some negotiations are advanced, but at this time, there is nothing concrete.

As the company searches for a buyer, it has reassured investors that it will remain in complete compliance with Australian laws regarding market disclosure. The company will keep shareholders informed of all discussions and decisions.

Increased Revenue is Not Enough

The sale of the company is not due to not generating profits. In fact, there has been increased growth in the first quarter of 2023. The company’s expansion in the United States has driven growth and revenue increased 103% year-on-year. The Canadian part of the company also showed first quarter growth with an increase of 21%.

Unfortunately, the growing revenue in the United States may not be enough to keep PointsBet in the US. There was a forecasted loss of as much as $88 million in the second quarter. With many economic pressures affecting the company, PointsBet has had to find various ways to cut costs. This will help with increasing profits overall.

After a cost and efficiency review of operations in North America, the company noted that the streamlining of operations will result in a cost savings of around $6 million. This is being achieved by reducing the number of employees in the US sector by 12%. These figures will be quite appealing to potential buyers. 

Despite earning money and cutting costs, the company has made a final decision to sell US operations after suffering financial losses for two consecutive years. The changes in the laws in the US have allowed multiple sportsbooks to enter the market. The increased competition has proven to be an obstacle for PointsBet, which believed the company will thrive if it is purchased by another operator that can combine access to an online casino platform.

Benefits for Potential Buyers

As soon as PointsBet started talking about possibly selling US operations, there were interested buyers. The company has also been trying to facilitate a sale of the Australian arm. There are many reasons buyers are interested in finalizing a sale. PointsBet currently sits atop a $390 million cash pile and it has valid licenses to operate in 14 states in the US. The latest launch was in Ohio. While the company did secure a license from Massachusetts, it withdrew from the market stating it would rather focus on exciting operations. According to Offers Bet, an online betting offers guide in the US, currently, the company operates in many states where sports betting is a huge pastime. Licenses in New Jersey, Pennsylvania, Illinois, and Michigan are appealing to buyers. PointsBet also launched in New York, helping the state reach record highs for sports betting. Known for offering competitive odds, PointsBet has been extremely successful in New York.

There have been a few buyers that have shown interest, including Penn Entertainment, Bally’s, and Betr, an operator from Australia. Bally’s has considered purchasing the sportsbook as a way to get back into the betting market after making some poor investments in the past few years. In 2021, Bally’s acquired Monkey Knife Fight for $125 million and in February of this year, the site was shut down. Bally’s does not want to make the same mistake twice and knows the value and reputation that comes with acquiring PointsBet.

The Australian company Betr had already made a bid to buy the Australian operation. However, the offer of $220 million was rejected by PointsBet and the deal fell through. PointsBet felt that the offer did not coincide with the current market value. Now, Betr is looking to move into the US industry and since there is already a relationship with PointsBet, the company will be making an offer on the US operations. To start operating in the US, Betr will have to create a new name for itself, which was done when the Ohio sportsbook was launched in January under the Betr brand. It was a $50 million startup company that features micro bets.

Another potential buyer is Penn Entertainment. This company is well known and respected in the industry and it owns and operates the Barstool Sports sites as well as the Hollywood Casino sites. Penn Entertainment holds a 7% stake in the Australian division of PointsBet, so purchasing the US sector would make sense.

At this point, no official offers have been made and the company continues to operate in the 14 states where it is licensed. After failed sales attempts in Australia, PointsBet is hopeful for a US takeover that will be financially beneficial to both the buyer and PointsBet. Who will the buyer be and how much will the acquisition cost? That remains to be seen.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.