Pointsbet shares charge higher on monster capital return plan

It will be raining cash for this betting company's shareholders soon.

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Pointsbet Holdings Ltd (ASX: PBH) shares are racing higher on Friday morning.

At the time of writing, the sports betting company's shares are up 6.5% to $1.73.

Why are Pointsbet shares racing higher?

Investors have been scrambling to buy the company's shares this morning after it announced the initial completion of the sale of its US business to Fanatics Betting and Gaming.

This followed the satisfaction of the required conditions, including the requisite US gaming regulatory approvals for the initial transferring states.

According to the release, Pointsbet has received US$175 million (plus agreed adjustments), representing the initial instalment of the headline purchase price of US$225 million.

Following the receipt, it has transferred the operating businesses in eight US states to Fanatics Betting and Gaming. The remaining US state operations will transfer once applicable gaming approvals are obtained.

In addition, ownership of Pointsbet's Advanced Deposit Wagering (ADW) racing business has also transferred to Fanatics.

Capital return

As per previous announcements, Pointsbet intends to return the proceeds from the US business sale to shareholders via two capital return tranches.

The first tranche will see the company return A$315.41 million or A$1 per share.

To put that into context, Pointsbet shares closed at $1.63 on Thursday. This means that the capital return represents a yield of 61.3% based on that close price.

To be eligible to receive this capital return, investors need to own Pointsbet shares before they trade ex-return of capital on 6 September. After which, investors can look forward to receiving this $1 per share payment later this month on 22 September.

Pointsbet is seeking a class ruling from the Australian Taxation Office (ATO) to confirm key Australian tax implications for shareholders receiving both capital returns. However, a final class ruling is not expected to be issued by the tax office until after the scheme is completed.

Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. 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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