PointsBet has reportedly changed strategy and is now exploring the possibility of selling its US operations after failing to secure a buyer for its Australian arm.
According to the Australian Financial Review (AFR), the company recently hired New York-based investment bank Moelis & Co to help facilitate the sale of its North American business.
The company’s shares surged by 7.6% on Friday (14 April) following the initial report.
PointsBet’s desire to offload a part of its business is not news.
In December, the company announced it was in talks with News Corp-backed Betr regarding the sale of its Australian trading business.
However, the talks have stalled, reportedly due to PointsBet CEO Sam Swanell’s reluctance to reduce the price tag of approximately A$250m for the division.
PointsBet’s US business is currently unprofitable and is yet to make a dent in strong competition from FanDuel, DraftKings and BetMGM, which collectively hold nearly 85% of the market.
By selling its domestic Australian business, those funds could have been reinvested to support PointsBet’s growth in the US market.
This, in turn, could have improved the operator’s profitability prospects.
Entain has also been rumoured to be a bidder for PointsBet’s Australian arm, but no official announcement has been made and progress appears to have stalled.
PointsBet’s share price has witnessed a significant decline recently, with a 19% drop over the first three months of 2023 and an almost 59% fall in the past 12 months.
For H1 2023 (six months ending December 2023), the company reported a net win of A$105.3m in Australia, as well as A$70.1m in the US, and A$6.7m in Canada.
The company has been granted market access in 14 US states, plus Ontario in Canada.
As of April, PointsBet is live in Indiana, Colorado, Illinois, Kansas, Iowa, Louisiana, Michigan, Ohio, Maryland, New Jersey, Pennsylvania, Virginia, New York, and West Virginia.
However, the company withdrew its licence application in Massachusetts just weeks before the state’s mobile sports betting launch.
It is unclear who has shown interest in the US division, although PointsBet’s proprietary trading technology is understood to be viewed as an attractive asset.
According to the AFR, one private equity group has shown interest, but early indications suggest PointsBet is not convinced by the deal due to pricing and structure.
While Bally’s Corporation expressed an interest in acquiring PointsBet’s US assets last year, it remains unclear whether the company is still interested in acquiring PointsBet US under new chief executive Robeson Reeves.
Another potential buyer could be Penn Entertainment, which already operates the Barstool Sportsbook in the US. A deal for PointsBet could potentially increase market share for the brand.
Penn Entertainment already owns a 6% stake in the Australian operator.