Shares of online bookmaker Pointsbet Holdings Ltd (ASX: PBH) entered a trading halt last night as the company prepares to raise capital in a bid to grow its online business.
The Rask Finance video below explains both capital raisings and trading halts:
PointsBet is a corporate bookmaker based out of Darwin with operations in both Australia and the USA. PointsBet has developed a scalable cloud-based wagering platform through which it offers its clients innovative sports and race wagering products.
Trading Halt & Equity Raising
PointsBet plans to raise $122.1 million via a fully underwritten capital raising. This will include a $60 million institutional placement and a 1-for-6 accelerated pro-rata renounceable entitlement offer to raise a further $62.1 million.
The institutional placement will be priced at $3.60 per share, which represents a 13.9% discount to the last closing price of $4.18.
The 1-for-6 entitlement offer for eligible shareholders will be priced significantly cheaper at $3.20 per new share, which is at a 23.4% discount to yesterday’s closing price.
Proceeds raised will be used to support marketing and client acquisition, technology and product development, further U.S business development, and balance sheet flexibility.
The Australian-based bookmaker has been growing rapidly in Australia but it’s in the huge and currently highly regulated US market where the company’s future success may lie. For the majority of US states, online sports betting is still illegal. However, that is set to change quickly with the Supreme Court of the United States lifting the federal ban on sports betting last year.
The capital raising wasn’t the only thing on PointsBet’s agenda yesterday, with management also providing a trading update after the first quarter of the financial year. Turnover was up 138% on the previous corresponding period to $235.8 million. The company’s net win was also up 138% at $11.8 million.
The large uplift in turnover was driven by PointsBet’s expansion into the US market and continued growth within Australia. Registered clients increased to 148,902 representing an increase of 223% on the previous corresponding period. Of those, 87,391 clients were considered to be ‘active’ which was up 166%.
PointsBet is hoping to continue to drive growth in the US with plans to move into the states of Iowa and Indiana in the near term. As more states continue to legalise sports betting, PointsBet will look to capitalise and take a piece of the action.
Would I Take A Punt On PointsBet?
I have little doubt that within a few years, the majority of US states will have legalised sports betting. However, PointsBet will be far from the only player trying to score a slice of the pie. The competition will be fierce and the barriers to entry are relatively low.
Personally, I don’t see PointsBet having a durable competitive advantage and as a result, I think the company will struggle to earn above-average returns over the long-term.
I’d prefer to invest in the three proven shares discussed in the free report below
Disclosure: At the time of publishing, Luke has no financial interest in any companies mentioned.