Down 4%, why the PointsBet (ASX:PBH) share price is close to 12-month lows

Despite posting strong growth in FY21, things have gone from bad to worse for PointsBet shares.

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a man attending a sporting match looks down at his phone with his hand over his eyes in dismay as though his sporting bet has failed.

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The PointsBet Holdings Ltd (ASX: PBH) share price is fast approaching 12-month lows after sliding 16.7% year-to-date and down more than 40% from its February all-time highs.

At the time of writing, PointsBet shares are trading for $9.62, down 3.9% from yesterday’s closing price.

Let’s take a look at some potential factors that may have stunted shareholder value for PointsBet.

What’s weighing on the PointsBet share price?

Immense cash burn

PointsBet represents one of those loss-making, high growth narratives.

While many loss-making companies might take a more disciplined approach to capital management or making strides towards profitability, PointsBet has seen its losses balloon.

In its FY21 results, the company reported a 159% increase in revenue to $194.7 million. This was driven by a triple-digit uplift across key trading metrics such as betting turnover and active clients.

However, its strong growth came at a hefty price tag.

PointsBet reported a 314% increase in losses from $39.7 million in FY20 to $164.3 million in FY21.

Capital raising overhang

PointsBet has actively tapped into the pockets of its shareholders for more capital to sustain its growth trajectory.

The PointsBet share price made its debut on the ASX in June 2019 after successfully raising $75 million at $2.00 per share.

The company initiated a $122.1 million capital raising in October 2019 to fund its marketing, technology and US business development endeavours.

PointsBet raised another $303 million in September 2020 following its transformational deal with NBC Sports in the US.

More recently, PointsBet raised $400 million in August to further its US growth plans.

Weakness in broader tech

The ASX tech sector has struggled to outperform the broader market in 2021.

The S&P/ASX 200 Info Tech (INDEXASX: XIJ) is up 4.6% year-to-date compared to the S&P/ASX 200 Index (ASX: XJO) which has rallied 10.7%.

Many leading ASX 200 tech shares such as Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Xero Limited (ASX: XRO) have largely flatlined in the past few months.

The underperformance of tech and high growth names could be another factor weighing on the PointsBet share price.

Should you invest $1,000 in PointsBet right now?

Before you consider PointsBet, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and PointsBet wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Pointsbet Holdings Ltd, Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO and Xero. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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