The PointsBet Holdings Ltd (ASX: PBH) share price is missing out on the market’s gains on Thursday.
This is because the sports betting company requested a trading halt prior to the market open.
Why is the PointsBet share price halted?
The PointsBet share price was placed in a trading halt this morning so the company could launch an underwritten capital raising.
According to the release, PointsBet is aiming to raise approximately $400 million. This comprises a fully underwritten 1 for 9 accelerated pro rata renounceable entitlement offer, with retail rights trading, to raise approximately $184.9 million at $8.00 per new share, and a fully underwritten institutional placement to raise $215.1 million at $10.00 per new share.
With the PointsBet share price last trading at $11.29, this means discounts of 29.1% and 11.4%, respectively.
Why is PointsBet raising funds?
Given that PointsBet just finished FY 2021 (Q4 update here) with a cash balance of $245.5 million, investors may be curious why it is raising funds at this point.
According to the release, the company is raising funds to support its objective of consolidating and expanding upon its strong position in the rapidly expanding US sports betting and iGaming market.
Funding will be used to support North American marketing and client acquisition, technology and product development, US market access and government licensing fees, and continued investment in talent and scale of operations. Management also notes it will give it balance sheet flexibility.
PointsBet’s Managing Director and Group CEO, Sam Swanell, commented: “Since inception, PointsBet’s Board and management have been working to establish and consolidate the key building blocks that have put us in the strong position we are today to pursue the expansion of the North American sports betting and iGaming opportunity.”
“Today, in addition to our profitable Australian business, we have live operations in 6 US States with iGaming live in two of these states. By December 2022 we plan to be live in at least 19 North American states or provinces. The North American sports betting and iGaming market could be a US$54bn revenue opportunity by 2033 and our strategy is to continue to invest to become a top 5 player in this market, targeting a 10% market share in all key North American jurisdictions. The Capital Raising will position PointsBet to execute this strategy,” he concluded.
PointsBet Co-Founders, Andrew and Nicholas Fahey and Sam Swanell, will be selling down some of their holding.
Nick and Andrew Fahey will be selling 2 million shares and Sam Swanell will be offloading 0.9 million shares at $10.00 per share. This represents 15% of their respective interests in PointsBet.
And while Mr Swanell has confirmed that he does not intend to sell any further shares for a period of 12 months, the Faheys haven’t made the same commitment.
Some of these shares will be bought by the company’s Chairman, Brett Paton. He has agreed to purchase 1.45 million of the shares being sold by the Co-Founders at $10.00 per share. The remainder of the shares will be placed at the placement price with an institutional investor, independent of the capital raising.
The PointsBet share price is up 116% over the last 12 months.