Corporate bookmaker PointsBet Holdings Ltd (ASX: PBH) has recently announced a $122.1 million capital raising to support its US growth opportunity. The company has also witnessed a change of director’s interest notice with 4 directors acquiring a collective $2.3 million worth of shares.
Is this a buying opportunity?
The company has just completed its $85.9 million oversubscribed institutional placement and pending the completion of its $36.1 million retail offer. The institutional offer was heavily oversubscribed with a shortfall bookbuild clearing price of $4.00, representing an $0.80 premium to the entitlement offer price of $3.20.
While an oversubscribed capital raising is typically a good sign, the sheer size of the raise could cap any potential share price gains in the short-medium term. Especially taking into consideration that the company just raised $75 million for its IPO 5 months ago.
However, the progressive legalisation of sports betting in America is a truly significant opportunity. In an article from The Age, PointsBet CEO Sam Swanell said that the US sports betting market could be worth $5 billion by 2023 and that his company could realistically get a 10% slice of that. He also said that the latest capital raising will give the company a “decent runway” but might need to tap investors again depending on when other states – especially larger markets like Texas, California and New York – come into play.
PointsBet has demonstrated a strong performance to date, capturing an almost 7% share of New Jersey’s online sports betting market in the first quarter of this financial year. The company should continue to build on its market share momentum in both current and emerging markets.
Colorado legalises sports betting
US states continue to open up to legal sports betting both in a casino retail setting and via online/mobile sportsbooks. It was just last week that Colorado legalised sports betting, which will commence in May 2020. The licensing fee for all master licensees and sports betting operators is US$125,000 per license and the state is anticipating 40 license applications right out of the gate. PointsBet has both online and retail access to Colorado.
The US sports betting market is full of opportunities and PointsBet is going hard to acquire as much market share as possible. The company will continue to burn cash in its US business development, marketing and client acquisition activities as it goes up against long-standing fantasy league operators DraftKings and FanDuel.
Ultimately, this is an exciting space to be in and PointsBet is positioned front and centre to capitalise on the opportunity.
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Motley Fool contributor Lina Lim 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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