PointsBet CEO Confirms Talks Ongoing to Sell Various Operations

The Australia-based company confirmed “well advanced” talks to sell some or all of its business in North America. PointsBet is holding separate negotiations to sell its business Down Under, too.
PointsBet CEO Confirms Talks Ongoing to Sell Various Operations
By
May 03, 2023

The chief executive for PointsBet Holdings Limited confirmed that negotiations to sell some or all of its business in North America “are well advanced” and that separate talks to sell operations in its home country of Australia are also moving forward.

CEO Sam Swanell also said the company would put additional state launches in the US on hold, at least for now. PointsBet launched in its 14th US state, Ohio, on January 1.

Both developments are taking place as the company appears focused on preserving cash.

“We’ve got a strong balance sheet, but we acknowledge that at some point, we’re going to need some additional capital,” Swanell said in an earnings call last Thursday to discuss the third quarter of the company’s fiscal year (FY) for 2023, which ended on March 31.

“We continue to assess all of these credible strategic opportunities really carefully. But ultimately, in determining which of these opportunities would be pursued, we answer one key question: what will be most value accretive for shareholders.”

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Talks Ongoing to Sell Businesses

Last month, reports emerged that PointsBet had retained the services of a global investment bank to help sell its online casino and sports betting operations in North America.

“The company is currently in discussion with multiple parties in respect of potential transactions that would involve part or all of our North American business. Certain negotiations are well advanced,” Swanell said during Thursday’s call. He declined to elaborate.

Swanell also confirmed that PointsBet had terminated negotiations with NTD Proprietary Limited — a business venture that includes Rupert Murdoch’s News Corp, Tekkorp Capital, and industry executive Matthew Tripp — into acquiring its business in Australia.

“PointsBet has terminated those particular discussions [with NTD] but remains in discussion with other third parties who have expressed an interest in acquiring our Australian business,” Swanell said.

NTD launched its betr sportsbook in Australia in October 2022. The Australian book is not to be confused with Betr, a Miami-based micro-betting site co-founded by Joey Levy and Jake Paul that, like PointsBet, launched in Ohio on January 1.

“There is no certainty that any of these discussions referred to above will lead to a binding transaction,” Swanell warned on the call. “PointsBet confirms that it remains in compliance with its disclosure obligations, and we’ll keep the market informed of relevant developments.”

PointsBet had also hinted during an earnings call on February 27 that its US operations could be sold.

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Revenue Surge in North America

Despite the uncertainty about its future, PointsBet recorded $71 million in gross gaming revenue during its Q3 FY2023, up 38.6% from the year-ago quarter ($51.3 million).

The company attributed the increase to growth in North America. In the US, revenue more than doubled year-over-year to hit $33.2 million in Q3 2023. Meanwhile, PointsBet grossed $4.1 million in the third quarter in Canada, up 21% from Q2 FY2023.

In North America, PointsBet is live with sports betting in 14 US states — Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia, and West Virginia — plus Ontario. It aborted plans to launch sports betting in Massachusetts at the 11th hour.

PointsBet also has online casino gaming in five jurisdictions: Michigan, New Jersey, Ontario, Pennsylvania, and West Virginia.

But PointsBet also hinted that troubled waters could lie ahead. It forecast that the company as a whole would see an EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of between $51.3 million and $54.6 million in 2H FY2023 — meaning between January 1 and June 30.

Cash remains an issue moving forward. The company said repeated guidance it issued in late February — specifically, that it expects net cash outflow, excluding movement in player cash, to be about 30% lower compared to 1H 2023.

“We recently completed a cost and efficiency review of our North American operational workforce,” the company said in its earning presentation, adding that it had reduced its headcount by 12%. The cuts are projected to lead to approximately $4 million in annual cost savings.

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