At the time of writing, shares in the sports betting company have tumbled 11.87% to an 8-month low of $9.95.
Why the PointsBet share price is getting slammed
Capital raising discount
PointsBet’s placement and entitlement offer will issue new shares at an 11.4% and 32.8% discount to its last closing price of $11.91 on Wednesday, 28 July.
The size and discount of the capital raising may negatively impact existing shareholders since it results in share dilution.
This means that existing shares reflect a smaller percentage of ownership and are, thus, less valuable.
Independent of the capital raising, PointsBet’s co-founders have elected to sell a portion of their holdings.
Co-founders Nick Fahey and Andrew Fahey will sell 2.0 million shares in aggregate or 15% of their holdings.
In addition, Group CEO Sam Swanell will also be selling 0.9% million shares, also 15% of his holdings.
Another factor impacting the PointsBet share price might be its fourth-quarter update which was announced during its trading halt.
The fourth-quarter update highlighted triple-digit growth across key operating metrics such as betting turnover, active clients and gross win.
However, PointsBet’s explosive growth comes with a hefty price tag, with the company experiencing a net cash outflow of $81.9 million in the fourth quarter.
Third capital raising in two years
PointsBet has proven itself as a cash hungry business, raising approximately $800 million in the last two years.
In October 2019, just five months after the company’s Initial Public Offering, it elected to raise $122.1 million to support marketing and client acquisition, product development and US business development.
By September 2020, PointsBet announced its second capital raising, seeking to raise $303 million to fund its deal with NBCUniversal.
PointsBet share price snapshot
PointsBet has now entered negative year-to-date territory, down 17% in 2021.
Its shares have slumped almost 50% from their all-time high of $18.13 on 16 February.