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PointsBet share price crashes 27% lower on U.S. sport suspension

The PointsBet Holdings Ltd (ASX: PBH) share price has come under pressure on Friday following the release of an announcement.

In morning trade the sports betting company’s shares are down a disappointing 27% to a 52-week low of $1.88.

This means that the company’s shares are now trading below their IPO price of $2.00.

What did PointsBet announce?

This morning PointsBet released an announcement in response to news that several sporting leagues and competitions around the world have been suspended due to the coronavirus outbreak.

On Thursday the NBA, NHL, and MLB all announced the suspension of their seasons, several European football competitions have been suspended, and this morning the Australian Formula One Grand Prix has been cancelled.

According to the announcement, PointsBet acknowledges that the disruption caused to sporting competitions could have an impact on its business.

Management advised that it “understands and supports the precautionary measures being taken by sporting administrative bodies under these circumstances.”

However, it appears confident it has the balance sheet strength to easily navigate current market conditions.  

At the end of December PointsBet has A$147.9 million of corporate cash on its balance sheet, of which the majority of it is held in U.S. dollars. This is a positive given the collapse in the Australian dollar since then. The company also has no borrowings.

What now?

Management advised that it will keep the market informed of its cash position through its quarterly updates.

Until then, it explained that: “It is important to note that marketing costs are predominately variable in nature, thus providing PointsBet flexibility to adjust and optimise its marketing spend given the developing circumstances. Management continues to monitor communications from Australian racing bodies, global sporting leagues, and other relevant stakeholders in this regard.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. 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.