Here's why the Pointsbet share price is tumbling 17% on Monday

Pointsbet shares are taking a hiding on some big news out of the US.

Key points
  • Pointsbet shares are plunging around 17% in lunchtime trading
  • The company has announced plans to sell its US division for $222 million
  • Pointsbet shareholders will receive capital returns from the sale, which will see the company leave the US market

It's been a tough start to the trading week so far for ASX shares and the S&P/ASX 200 Index (ASX: XJO). At the time of writing, the ASX 200 has slipped by 0.15%, putting the Index at under 7,250 points. But what about the share price of Pointsbet Holdings Ltd (ASX: PBH)?

Pointsbet shares are crashing in lunchtime trading. The company closed at $1.85 a share last Friday and its shares are currently fetching $1.535 apiece, a plunge of 16.8%. But that's a recovery from its intraday low of $1.43 a share, a loss of 22.7%. So what's going on?

This morning, Pointsbet released an ASX announcement that told investors that "trading in the securities of the entity will be temporarily paused pending a further announcement".

Soon after, the company came out with another announcement. This revealed to shareholders that Pointsbet has entered into a binding agreement to sell its US business to Fanatics Betting and Gaming for US$150 million ($222 million).

A young man clasps his hand to his head with a pained expression on his face and a laptop in front of him.

Image source: Getty Images

Pointsbet share price crashes as US business offloaded for $222 million

The proposed sale is subject to a few conditions, including regulatory approvals and shareholder assent. Pointsbet will still retain both its Australian and Canadian businesses, and shareholders will receive the net proceeds of the sale directly in the form of capital returns. The company estimates these returns will have a value of between $1.07 and $1.10 per share.

Pointsbet also revealed that after the sale of its US business, its remaining Australian and Canadian businesses "will be at or around EBITDA breakeven on a stand–alone basis".

Shareholders will vote on the sale at a shareholders' meeting scheduled to occur "in late June 20203". The Pointsbet board has unanimously recommended that shareholders vote in favour of the sale in the absence of a better offer.

Here's some of what Pointsbet CEO Sam Swanell had to say on his news today:

The sale of the US Business to Fanatics Betting and Gaming delivers the most attractive risk-adjusted value outcome for shareholders compared to the risks and benefits of other options including the status quo.

Fanatics Betting and Gaming has recognised our strategy, technology and team, as a platform for their own expansion in the online sports betting and iGaming market. Given Fanatics significant presence in the US sports market, we consider them to be a natural acquirer of our US Business…

Importantly the proposed transaction removes the risks and capital requirements associated with executing the Company's United States strategy.

Company snapshot

Prior to today, the Pointsbet share price had a cracking year in 2023 so far. It was up 13% year to date but is now 2% in the red.

Over the past 12 months though, Pointsbet shares have now lost around 41% of their value. And the company is down around 90% from its 2021 all-time highs of more than $15 a share. This ASX share has a current market capitalisation of $461 million.

Motley Fool contributor Sebastian Bowen 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 PointsBet. The Motley Fool Australia has recommended 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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