Pointsbet share price dives 8% amid potential to cash in with an offload

Several parties are kicking Pointsbet's tyres, but shareholders are still selling out on Friday.

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Key points

  • Shares in Pointsbet are deeply in the red on Friday following the company's third-quarter figures
  • Efforts to reduce expenses are being implemented, but net cash outflows for the quarter still tallied $88.7 million
  • Management is in discussions with interest parties over potential transactions

The Pointsbet Holdings Ltd (ASX: PBH) share price is getting dunked on today… and not the celebratory Gatorade shower type.

As we head into the afternoon, shareholders are pushing the company's shares 8.2% lower to $1.52 on Friday. The negative reaction follows the publishing of Pointsbet's third-quarter results for FY23 this morning.

Initially, the market responded positively, pushing the wagering platform's shares into the green by 9%. However, the excitement has since resided as investors digested the information contained in the quarterly report.

Read the room or suffer the sell-down

Pointsbet shareholders are not holding any punches today as the Pointsbet share price topples. Here are the hard-hitting headlines figures from today's report:

  • Total sports betting turnover up 4% year-on-year to $1,449.9 million
  • Sports betting net win (revenue) up 28% to $91.2 million
  • iGaming net win up 181% to $15.4 million
  • Total group net win up 39% to $106.6 million
  • Net cash outflow of $88.7 million during the third quarter
  • Corporate available cash at the end of 31 March 2023 of $251.7 million

The market appears unimpressed with the topline growth exhibited by Pointsbet in the latest quarter, coinciding with continued bottom-line losses. Such losses are expected to persist in the second half, adding to the weight anchoring the Pointsbet share price.

According to the company, normalised group EBITDA losses are forecast to range between $77 million and $82 million in the second half of FY23. However, a recently completed cost review of Pointsbet's North American operations led to a 12% reduction in its workforce.

On a positive note, net win growth was achieved while cutting marketing and promotion expenses. Compared to the prior corresponding period, these items were reduced by 12% and 28% respectively.

Despite the efforts, the market seems apprehensive to reward Pointsbet as economic headwinds swirl. Contrast this with the skyrocketing share price of Megaport Ltd (ASX: MP1) today following its focus on positive EBITDA.

What else could be moving the Pointsbet share price?

Pointsbet is in discussions with multiple parties regarding a possible transaction for its North American business. According to the release, this is in a bid to 'add value for our shareholders'. These negotiations are said to be 'well advanced'.

Additionally, management is also keeping an open line of communication with third parties interested in the Australian business. Though, it was noted these discussions are not with the same potential suitors addressed with media speculation back on 27 December 2022.

Whatever the outcome, many shareholders are deciding today not to stick around to find out.

The Pointsbet share price is down 41.7% compared to a year ago. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is approximately flat over the same period.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport and PointsBet. The Motley Fool Australia has recommended Megaport and PointsBet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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