Nonchalant PointsBet IPO

Despite a turbulent 12 months for IPO’s, Australian online sports betting company PointsBet (ASX: PBH) has hit the ground running to have already delivered a 28.5% gain for IPO participants after just five days of trading.

The Australian company launched their online service in 2017 at a time when various operators were exiting, and aggressive marketing has seen the company increase their client base five-fold over the past 12 months.

This has come at a time in which the industry has seen a number of international mergers, leading to the departure of major brands. However, new regulation around advertising, point-of-consumption tax, and incentive offers have diminished the appeal for new entrants seeking to enter the market.

Aggressive marketing by PointsBet has enabled the company to expand its client base in Australia but investors will be more interested in the company’s planned expansion into the United States. This comes after the U.S Supreme Court overturned a 1992 law which prevented sports betting beyond the States of Nevada and New Jersey.

Since then, there are only 7 States which have not introduced bills to legalise sports betting.

Seeking to replicate the bevy of activity Australia saw in the online sports betting space a decade ago, PointsBet launched in the United States in January 2019 having launched their app and has already acquired more than 18,000 clients.

“There is significant market opportunity in the United States for PointsBet, as a result of the Professional and Amateur Sport Protection Act being overturned by the US Supreme Court in May 2018,” PointsBet chairman, Brett Paton, said in the listing prospectus.

With a raging sports culture home to four of the largest leagues in terms of revenue (NFL, MLB, NBA and NHL), there is a sizable drawcard for sports betting operators in terms of client base potential and daily activity.

Via the IPO, PointsBet raised AUD $75 million with new investors owning a 34.1% stake in the company which listed with a market capitalisation of just over $200 million.

The executive team at PointsBet may be known to industry followers with Chairman Brett Paton previously having served directorships at Tabcorp (ASX: TAH) and The Star Entertainment Group (ASX: SGR) whilst CEO Sam Swanell played a key role in the establishment of which was acquired by gaming conglomerate William Hill in 2013.

Investors were invited to participate in a priority allocation for the PointsBet IPO by stockbroker Bell Potter Securities at $2.00 per share.

After four days of trading on the ASX (June 17, 2019), PointsBet closed at $2.57, a 28.5% gain from their IPO offer price.

Home to a population of 25 million, the Australian racing and sports betting industry is valued at $4.9 billion per year, highlighting the appeal of operating in the United States where there is a population of more than 329 million.