The PointsBet Holdings Ltd (ASX: PBH) share price is facing heavy selling pressure today. At the time of writing, shares in the company are down 9.32% to $12.26.
We take a closer look at what might be driving down the PointsBet share price today.
Why is the PointsBet share price being sold off?
A research note from Deutsche Bank said online sports betting legalisation in New York was “hanging by a thread”. On the issue, Deutsche Bank also stated that:
Comments from NY politicians, as reported by affiliate media, appear far more pessimistic than those of several weeks ago around the prospects of NY legalising online sports betting in this session.
The decision will be settled in the coming weeks. However, what was once an almost-certain outcome has now turned into a coin-flip.
The uncertainty saw US gaming and sports betting shares including fall. This includes Draftkings Inc (NASDAQ: DKNG) and Penn National Gaming Inc (NASDAQ PENN) who finished overnight down 8.50% and 7.85%.
In PointsBet’s half-year results presentation, the company hinted at a number of growth opportunities including expanding into New York and Canada.
Why is New York so important?
New York is seen as the cash cow for sports betting in the United States. While the state has legalised retail sports betting, online sports betting, more broadly speaking, has surged during COVID-19.
PointsBet has not commented on the size of New York for quite some time. Additionally, an investor presentation from October 2019 still adds valuable perspective for the significant revenue opportunity in New York.
Highlighting the US market opportunity and size, PointsBet notes that New York has an estimated market size in CY23 of US$1,350 million. The second down the list is Illinois at US$784 million and Ohio at US$599 million.
What’s next for the PointsBet share price?
PointsBet represents a richly valued, loss-making, growth company. Despite its market capitalisation of $2.2 billion, the company recorded a loss of almost $86 million for the half-year ended 31 December.
The expectations are sky-high for the company to deliver outstanding growth in the near-term. For the most part, the company has been able to meet expectations with strong half-year results, recently securing market access in Pennsylvania and Mississippi, and a game-changing marketing deal with NBCUniversal.
New York will vote to take place in the coming weeks. However, the PointsBet share price might have to brace for increased volatility.