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PointsBet reports strong growth in Q1 and announces $122.1 million capital raising

The PointsBet Holdings Ltd (ASX: PBH) share price won’t be going anywhere on Tuesday after it requested a trading halt following the market close.

Why did PointsBet request a trading halt?

As well as providing a trading update (more on that later), this afternoon PointsBet announced a major capital raising.

According to the release, PointsBet will raise $122.1 million through a fully underwritten capital raising. This comprises a $60 million institutional placement and a 1 for 6 accelerated pro rata renounceable entitlement offer with retail entitlements trading to raise $62.1 million.

The placement to raise $60 million will be undertaken at $3.60 per new share. This represents a 13.9% discount to PointsBet’s last closing price of $4.18. Whereas the 1 for 6 entitlement offer will be undertaken at $3.20 per new share. This is a 23.4% discount to the last close price.

Why is the company raising funds?

Management advised that the proceeds raised under the capital raising will be used to support market and client acquisition and technology and product development.

They will also be used to support the development of its US business. This includes market access and government licensing fees, sportsbook fit out costs, and balance sheet flexibility.

Trading update.

PointsBet also provided the market with an unaudited update on its performance during the first quarter.

According to the release, the corporate bookmaker’s turnover jumped 138% over the prior corresponding period to $235.8 million during the quarter. Also rising 138% was PointsBet’s net win, which came in at $11.8 million.

Net cash from operating activities was negative $8.8 million. Combined with its ~$8.5 million investment in its U.S. business development, PointsBet’s cash balance fell from $75.9 million to $57.6 million.

Driving the strong turnover growth was its expansion in the United States and solid performance in Australia. This helped take its registered clients to 148,902 during the quarter, up 223% on the prior corresponding period. Active clients also rose strongly and increased 166% on the same period last year to 87,391.

Looking ahead, the company is aiming to boost its growth in the United States with an expansion into Iowa and Indiana mobile environment in the near term. It is also watching the Illinois Gaming Board closely as it contemplates sports betting regulations for the State.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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