Consumer cyclical

Whistle-blower calls for urgent changes in PointsBet’s US leadership and strategy

By Market Index
Wed 07 Sep 22, 4:24pm (AEST)
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Key Points

  • PointsBet has racked up more than $450m in losses over two years
  • Ex-staffer calls for a change of leadership
  • PointsBet’s share price has slumped by around -80% over the past 12 months

Perennial loss maker PointsBet (ASX: PBH), which has racked up more than $450m in losses over two years, is down -3.13% in afternoon trade following fresh allegations from a former employee in the US that the bookmaker ‘doesn’t know what it’s doing.’

What’s become the subject of banter between institutional investors are new claims by an unnamed ex-staffer (Mr X) – who incidentally worked in both the Australian and US offices - who within an interview hosted via online service Stream, spoke frankly about the business’s shortcoming and questionable leadership.

US market just not that into PointsBet

As well as pointing to a higher-than-average churn rate, Mr X calls for a change of leadership within PointsBet’s US operation.

Despite an aggressive marketing spend in the US, Mr X argues that the “American market is not that interested in the PointsBet brand”.

Mr X also claimed within the Stream interview that too many partnerships like the ones with NBC and Denver Nuggets - the company’s official gaming team – simply divert money from being invested more meaningfully elsewhere, notably in online betting.

“Nothing’s going to change if senior leadership stays the same,” Mr X noted.

Mr X also suggested PointsBet reconsider its partnerships and invest in iGaming, where it has started to make inroads.

Investors should note that since launching there in 2018, the North American sports betting market now accounts for around half total group turnover.

Losses widen

These unsolicited comments do little to appease investor fears that the ASX-wagering company isn’t throwing good money after bad trying to compete the fiercely competitive North American sports betting market.

Recently released results reveal that while PointsBet increased revenue by 52% to $296.5m, net losses widened to $267.7m.

Usurpingly, PointsBet’s share price has slumped by around -80% over the past 12 months.

PointsBet share price over 12 months.


What brokers think

Year-to-date the freefall has been even more acute, with the share price having bounced from a high of $7.17 to $2.18.


Consensus on PointsBet is Hold.


Based on Morningstar’s fair value of $6.64 the stock appears to be significantly undervalued.


Based on the two brokers that cover PointsBet (as reported on by FN Arena) the stock is currently trading with 37.6% upside the target price of $3.00.


While PointsBet recently updated its loss forecasts between -6% and 4% through to FY25 - to reflect a fine-tuning of addressable markets in US states, plus higher costs – Credit Suisse expects investors patience to be rewarded.


Given the size of the North American iGaming and Sports Betting addressable markets, the broker believes investors will benefit even without buying in early.


The Neutral rating is retained and the target price decreases to $3.20 from $3.30.


With PointsBet Holdings' FY22 results slightly ahead of Ord Minnett's forecast for gross profit, the broker retains a Hold rating (target price $2.80) and awaits marketing trends by competitors, following last year's wild promotions.

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Market Index

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