Embattled PointsBet launches in Louisiana; twelfth US state but rough seas remain

Only weeks after being hit by whistleblower reports from a former staffer that PointsBet’s (ASX:PBH) US operations are causing the company to lose money, PointsBet has launched in its twelfth US state; Louisiana. 

In response, investors are selling off PointsBet today; the company’s share price is down -3.42%. 

What gives? To make sense of that, we need to recap the whistleblower saga from early September. 

An unnamed former staffer approached Australian media earlier this month to let the market know there are concerns within the company regarding the management of PointsBet’s US operations. 

According to that whistleblower, the company’s entrance into the US market back in 2018 has been defined by a lacklustre engagement from American consumers. 

Revenue does not a profit make 

The whistleblower described a North American market just not that into PointsBet’s products, even after the company has aggressively marketed its services in the jurisdiction. 

With that said, it’s only fair to note the company’s revenue is in a large part now based on its US activities, worth about half the total turnover. However, while revenue is up, overall losses are still the defining trend. 

In late July, the company’s share price briefly surged on the back of its fourth quarter results, but was quickly sold off, perhaps by investors looking to reduce losses as much as possible and get out of the game. 

Part of PointsBet’s struggles in the US are due to an already saturated market. In Australia, all PointsBet really has to contend with is SportsBet and TABTouch, if you narrow your scope to major competitors. 

PointsBet continues to advance relationships with other US firms; today’s Louisiana launch is the fourth state launch event conducted alongside American partner firm Penn National Gaming.

The whistleblower’s concerns are further underlined by the fact PointsBet was booted off the ASX200 earlier this month. 

Tumbling performance

PointsBet was a former ‘unicorn’ on the bourse, with shares worth $15.80 in mid-Feb of 2021. 

Today, those shares are worth $1.98. 

As a result: 

• One year returns are down -80% 

• Year to date performance is down -71% 

PointsBet currently has a market cap of $605m. Despite whistleblower reports and an absolute crash-and-burn in the value of shares, numerous brokers are still recommending buy for PointsBet. 

Management focused on Louisiana sports fans 

“The sports community of Louisiana is unmatched with their devotion to local teams, the New Orleans Saints of the NFL, New Orleans Pelicans of the NBA and nationally recognised college football,” PointsBet US CEO Johnny Aitken said. 

“With the NFL and CFB season in full swing, the timing is perfect to showcase our live betting capabilities.”

Whether or not sports season will be enough to turn the tide for PointsBet remains to be seen, but if allegations the company is wasting money across 11 different US states is to be believed, the company may need luck beyond Louisiana. 

PointsBet is also active in Canada and Ireland. 

A look at PointsBet's performance since June 2019