Susquehanna takes a 12.8% stake in PointsBet, shares rally 11% at open

PointsBet (ASX: PBH) has secured a $94.2m investment from Susquehanna - one of the world’s largest trading firms. The company's stock rallied 11.6% as the market opened.

SIG Sports Investment, a member of the Susquehanna, will be issued 38.75m shares at $2.43 per share - a 15% premium to the company’s 5-day volume weighted average price to 17 June.

Upon issuance, Susquehanna will become PointsBet’s largest shareholder, with 12.8% of the company’s issued capital.  

“After several years of thoroughly evaluating the North American sports betting market for the right partner, SIG Sports is pleased to have made what we consider to be a long-term investment in PointsBet,” said SIG Managing Director Jeff Yass. 

“We believe PointsBet has great potential for future growth and success in the North American sports betting market and SIG has both the analytics and capital to help realise that potential.”

In parallel, PointsBet announced a pro-rata deferred bonus equity option (DBEO) for eligible shareholders, enabling the company to raise up to $150m over the next two years.

Analytics partnership

Alongside the equity investment, PointsBet Europe has entered into an exploratory partnership with Nellie Analytics - a member of SIG.

Under the agreement, Nellie will provide exclusive sports analytical services to Pointsbet at zero cost for 9 months.

The exploratory period will be used to develop the terms and scope for a definitive, long-term agreement. 

PointsBet CEO Sam Swanell said the partnership will enable the business to have “more accurate lines and sharper risk management.” 

“This will flow through to our customers in the form of higher wagering limits, less price suspension, faster bet placements and improved value for bettors,” he said.

A vote of confidence

PointsBet shares have been in a downward spiral ever since topping around $17.60 last February.

Free falling tech valuations, the company's high cash burn and rising interest rates are arguably the main factors that have discounted the company's once +$2bn valuation.

It's interesting to see such a massive name in the investment world willing to take a 12.8% stake in the company at a 15% premium.

Unanswered questions

SIG's investment is not going to magically fix all of PointsBet's problems such as:

• Massive cash burn

  • FY20: -$41.5m

  • FY21: -$187.1m

  • FY22: -$136.7m (9 months to 31 March 2022)

• Volatile US market share

• Rising interest rates and more valuation stress for tech companies

That said, SIG views this as a 'long-term' investment in both PointsBet and the growing North American sports betting scene.

The equity stake plus PointsBet's DBEO will bolster its cash position and allow the company to continue its growth aspirations.