As PointsBet’s stock price hovers in the low single digits, its board of directors has reportedly rejected a purchase offer from a consortium joined by Rupert Murdoch’s News Corp. seeking to acquire the company’s Australian division.
Nearly two weeks ago, PointsBet’s board declined a non-binding indicative offer from the consortium, according to the Sydney Morning Herald, which first reported the news. The proposal, which reportedly fell within the range of A$220 million to A$300 million, was not placed before shareholders of the Australian-headquartered sportsbook operator.
News Corp. made waves in April with plans to enter the Australian online racing and sports betting market through the consortium, which also includes former BetEasy CEO Matthew Tripp and global gaming investment firm Tekkorp Capital. News Corp. is one of the world’s largest media conglomerates.
When contacted by Sports Handle on Sunday evening, a PointsBet U.S. spokesman declined comment.
News Corp.’s foray into sports betting
A second incarnation of News Corp. was formed in June 2013 following spinoff of numerous media assets from the original version of the company, which was founded in 1980 by Murdoch. News Corp. owns several prominent media entities, including Dow Jones & Co., News Corp. Australia, the New York Post, and HarperCollins, a major book publisher.
News Corp. Australia has made a number of key racing acquisitions in the last decade, including the purchase of an Aussie horse racing news site, Racenet, in 2018. Two years earlier, News Corp. acquired Punters.com.au, the nation’s largest digital racing publisher, in a multi-million dollar purchase. The consortium is targeting a sports betting launch in the coming months, the Wall Street Journal reported, hoping to do so in time for Australia’s spring horse racing season, which begins in August.
In 2019, News Corp. gained a stake in PointsBet through the Scaleup Media fund, an Australian media-for-equity fund owned by some of the nation’s largest media companies. News Corp joined the fund with REA Group, Foxtrel, and Nova Entertainment, three other top companies in the Australian media space.
Big run for Pointsbet on front of OZ business section today – and then discover this is another gambling business in which News Corp has a stake. Sigh. pic.twitter.com/OXTa2jwGfq
— Stephen Mayne (@MayneReport) May 26, 2019
BetMakers, a wagering technology company that is listed on the Australian Stock Exchange, will serve as the tech services provider for News Corp’s sports betting and racing venture. Back in the U.S., BetMakers powers a fixed-odds horse racing betting platform at Monmouth Park in New Jersey.
Implications for FOX-NBCUniversal
When PointsBet released 2022 third-quarter earnings in April, the company reported U.S. handle of A$818.6 million, an increase of 70% from the prior year’s quarter. PointsBet’s handle in the U.S. represented 58.5% of the company’s overall handle for the period. The company’s Australian division reported turnover (the Australian term for handle) of A$579.4 million, a year-over-year increase of 37% from the same period in 2021.
For the quarter, PointsBet’s U.S. division finished with a net win rate of 2.3%, a considerable decline from the 5.5% win rate the U.S. segment attained in the third quarter of 2021. PointsBet defines net win as the dollar amount from bettors who placed losing wagers minus the dollar amount from bettors who placed winning wagers, minus promotional costs. The total win in the U.S. fell to A$24.6 million for the period, a decline of 8%.
PointsBet Q3 revenue up 24% as North America growth helps turnover rocket
Monday 2 May 2022 – 8:34 amhttps://t.co/Ye1ThgippE
PointsBet reaped the benefits of a series of launches across North America as it recorded a 24% year-on-year increase in revenue during Q3, thank… pic.twitter.com/6CLhqVcYLT
— betcompanies (@betcompanies) May 2, 2022
Last month, Bell Potter analyst Chris Savage lowered PointsBet’s price target to A$6.00 on reduced revenue forecasts. The estimate represents a 20% decline from Bell Potter’s previous target of A$7.50. Bell Potter also lowered its revenue forecasts on PointsBet for Fiscal Years 2022, 2023, and 2024 by 6-7%, driven by lower forecasts on win rates in the U.S. At the same time, PointsBet expects its Australian division to be EBITDA positive by year’s end, an estimate that is consistent with Bell Potter’s forecast.
The Australian business is valued at more than A$200 million, the Herald reported, citing market sources. PointsBet had a market capitalization of around U.S. $414 million on Monday, one that is down significantly over the last year. Some Australian investors are concerned about the possibility of a split between the company’s U.S. and Australian segments, an industry source told Sports Handle.
In August 2020, PointsBet entered a five-year partnership with NBCUniversal in a deal that designated the company as the official sports betting partner of the network. Under the transformational deal, NBC received a 4.99% equity stake in the sportsbook operator, an amount that NBC can increase to around 25% once the five-year window expires.
NBC’s betting partner PointsBet not taking out any Super Bowl ads despite required $80M advertising spend under terms of deal with NBC, as other sports betting operators plan commercials for Sunday’s game. Story by @joshkosman. https://t.co/On8DyAnabE
— Daniel Wallach (@WALLACHLEGAL) February 11, 2022
On the Australian Stock Exchange, shares of PointsBet slumped 3.4% to $1.54. PointsBet shares are down considerably from a 52-week high of $10.35 last June, amid a rout in global sports betting stocks.
Besides maintaining ownership in News Corp., the Murdoch family also owns and controls Fox Corp. Murdoch’s son, Lachlan, was named chairman and CEO of Fox Corp. in 2019. Fox Corp. is currently embroiled in a dispute with Flutter over the fair market value of its minority stake in FanDuel Group.