PointsBet CEO Sam Swanell has confirmed that the group is in discussions with multiple third parties over the potential sale of its US business.
During the company’s Q3 earnings call, Swanell confirmed the reports circulating in the media that a sale of its US division could be on the cards and that conversations were already underway.
Reports stated that PointsBet hired New York-based Moelis & Company to provide guidance through the process. Reports suggested that the bank would explore all options, including a full sale of the US sports betting business as rumors continue to swirl about the long-term future of the company.
PointsBet US sale talks underway
Addressing investors, Swanell confirmed that discussions were taking place: “In response to media speculation on 27th December 2022, PointsBet advised that it was in discussions regarding a potential transaction involving the sale of its Australian Business points but has terminated those particular discussions, but remains in discussion with other third parties who have expressed any interest in acquiring our Australian business.
“There is no certainty that any of these discussions referred to above will lead to a binding transaction. PointsBet confirms that it remains in compliance with its disclosure obligations, and will keep the market informed of relevant developments.”
A statement also read: “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.”
He was asked by investors why the company was seeking to explore strategic alternatives, to which he explained that the company would require additional capital going forward.
Swanell explained: “We’ve built a valuable business, we’re pleased with our market conditioning, and we clearly have a growth plan that we’re delivering on. But at the same time, we’re conscious we operate in a rapidly evolving market. We’ve got a strong balance sheet but we acknowledge that at some point, we’re going to need some additional capital. So we continue to assess all of these sorts of credible strategic opportunities really carefully.”
Whilst the CEO could not go into specific discussions about the details of any sale, he did acknowledge that certain conversations were advanced without giving a time scale for any developments, rather explaining that he would update the markets at the appropriate time.
Eyebrows were raised when PointsBet backed out of the Massachusetts sports betting market at the eleventh hour, despite having received the necessary approvals for a category three online license. The firm said it already had a significant TAM to go for.
Another reason for the potential sale is that PointsBet is running out of cash, as its latest quarterly report showed that its net cash flow dropped by A$88.7m in Q3, leaving it with just $251.7m, indicating that it would run out of cash within a year.
However, management shrugged off those concerns, explaining that its revenue growth would offset any cash issues, explaining that “it’s all heading in the right direction.”
Q3 figures
All this information was released as PointsBet confirmed its Q3 figures for FY2022/23, revealing total revenue of A$106.6m, up 39% year-over-year and 3% sequentially.
Total global handle reached A$1.4bn, up 4% generating A$91.2m in revenue, up 28% YoY. Meanwhile, igaming growth reached 181% YoY, hitting A$15.4m.
In the US, total revenue grew by 103%, driving global growth as turnover reached A$49.8m. This was broken down into A$38m in sports betting and A$11.8m from igaming. Sports betting revenue doubled YoY whilst igaming revenue grew by 115%.
Meanwhile, in Canada, PointsBet had 28k active customers in the quarter and revenue hit A$6.1m. Sports betting generated A$2.4m of this revenue, whilst igaming contributed A$3.6m.
Following the withdrawal from the Massachusetts market, Swanell detailed that there were no more plans to expand in the US, particularly with the potential sale underway.
Citing that it already covers 35% of the adult US population Swanell outlined: “That TAM that we’ve got with 35% of the population is extremely large.
“We want to keep improving the growth in net win and keep managing that relationship with costs. We don’t foresee any launches in the short term.”
Assessing the quarterly performance, Swanell concluded: “Strong Momentum continues in our North American business and the Australian business is outperforming the market in an industry facing headwinds.
“Our North American business continues to grow. In January we went live in Ohio, our 14th US state, which now sees us serving 35% of the US adult population.”
