With its stock price lingering in the single digits, PointsBet received a lifeline of sorts on Monday from a bumper investment by one of the world’s largest proprietary financial trading firms.
PointsBet, an Australian-headquartered sports betting company, announced that it has secured an A$94 million ($65.3 million USD) investment from SIG Sports Investments Corp., a division of Susquehanna International Group of Companies. Under the deal, PointsBet will issue 38.7 million shares to SIG Sports at a price of A$2.43 a share, representing a premium of 15% to PointsBet’s five-day volume-weighted average price as of June 17. The investment gives SIG Sports a 12.8% stake in PointsBet, making it the largest shareholder of the prominent U.S. sports betting operator.
"My kids who are in the business told me that PointsBet has the best site, and they seem to be smart and they seem to be thinking the way we did." — Jeff Yass
Susquehanna to Focus on In-Game Betting Following PointsBet Deal — Interview https://t.co/EGb7vPJb8m
— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) June 20, 2022
The transaction is one of the largest investments from a financial trading firm into a sports betting-focused company since the Supreme Court’s historic PASPA decision four years ago. Susquehanna is co-founded by Jeff Yass, a billionaire options trader, who has found success in the past as a horse racing handicapper and professional gambler.
In many respects, PointsBet is a natural fit for SIG Sports. Boasting an innovative “PointsBetting” concept, the sportsbook caters to bettors eager to wager on offerings beyond binary outcomes of one side or the other. For example, a bettor who placed a $100 PointsBetting wager on the Dallas Mavericks to defeat the Phoenix Suns in Game 7 of the Western Conference semifinals would have won huge when the Mavs prevailed 123-90. At $100 a point, and factoring in the spread of Dallas getting 6.5 points, the bettor would have won $3,950. Conversely, a bettor runs the risk of losing thousands of dollars on a wager that fails.
Mavs are up 30 over the Suns at the half in game 7 in Phoenix. Anyone make that bet?
— Chris Surratt (@ChrisSurratt) May 16, 2022
SIG Sports, meanwhile, has earned plaudits as a sports betting market marker through its Dublin-based trading unit Nellie Analytics. Just as Susquehanna employs advanced statistical modeling to forecast trading patterns on financial markets, SIG Sports applies a similar quantitative approach to sports betting.
“After several years of thoroughly evaluating the North American market for the right partner, SIG Sports is pleased to have made a long-term investment in PointsBet,” Yass said in a statement. “We believe PointsBet has great potential for future growth and success in the North American market and SIG has both the analytics and capital to help realize that potential.”
Implications for in-game betting
Over the last six months, PointsBet has been encouraged by the growth of in-game betting in the U.S. During March Madness, PointsBet’s in-play handle rose by 116% over the previous year, representing 49% of the sportsbook’s total handle for the NCAA Tournament. By comparison, in-play represented about 35% of overall wagering at PointsBet on the 2021 NCAA Tournament, Group CEO Sam Swanell said during the company’s 2022 third-quarter earnings call in April.
While in-play betting in mature European markets accounts for upward of 75% of the overall handle, there is still considerable room for growth in the U.S. Following the completion of the 2021 NFL regular season, sports betting data provider Genius Sports disclosed that in-game betting made up about 25% of all NFL wagers during the 18-week regular season. Genius assumes that in-play for all sports will represent at least half of all wagers once the market reaches maturity.
“There is really very little in-game betting in the United States because no one really has the expertise,” Yass told Dow Jones Newswires. “We think we have the advantage there. That analytics, that mathematics, that technology is almost exactly the same for sports betting as it is for options trading.”
One aspect of the investment that remains unclear is the extent to which PointsBet will use SIG Sports’ predictive model for setting live odds on the in-game market. Based on Susquehanna’s experience, there are indications that the firm’s market-making capabilities are useful for in-game trading, with its ability to analyze vast amounts of data in real time.
Consider a key second-half play in Super Bowl LI when the Atlanta Falcons opted to throw the ball instead of burning the clock with a run. The decision, according to SIG’s quantitative models, improved the Patriots’ win probability from 1.73% to 2.41%, Forbes reported. New England erased a 28-3 third-quarter deficit in a historic 34-28 comeback victory. While the decision appeared of little importance at the time, the models showed one play call increased the Patriots’ chances of winning by about 40%.
Most people gave up on the Pats vs Falcons in the Super Bowl. I didn’t. This was my emergency halftime press conference. #28-3 pic.twitter.com/rFhVxaaIzC
— Dave Portnoy (@stoolpresidente) November 19, 2021
PointsBet also announced that its European subsidiary, formerly Banach Technology, has entered into an exploratory agreement with Nellie Analytics. During the nine-month exploratory period, Nellie Analytics will provide PointsBet Europe with sports analytics and quantitative modeling services while the parties work toward reaching a long-term definitive agreement, according to the companies.
“Since its inception, Nellie Analytics has sought to leverage SIG’s experience in quantitative modeling in financial markets and apply those lessons to creating a world-class sports analytics business, particularly focused on in-play,” said David Pollard, SIG’s head of strategic planning. “With the North American market still in early innings, we believe that PointsBet, with Nellie’s potential assistance, is well-positioned to capitalize on the market’s inevitable growth.”
On the Australian Stock Exchange, PointsBet shares jumped more than 18% to A$2.59 before closing Monday’s session at A$2.55 per share. On Tuesday, PointsBet rose another 9% to hit an intraday high of A$2.87, its highest level in two weeks. PointsBet is down more than 60% over the last six months, in line with the sell-off in global sports betting stocks.
PointsBet is live in nearly a dozen North American jurisdictions, including 10 U.S. states. The company made its Canadian debut in April with the rollout of an online platform in Ontario. PointsBet has a presence in a number of leading U.S. markets, most notably New York, New Jersey, Pennsylvania, and Illinois.
"Jeff Yass took a bankroll made on racetracks and in poker tables and built one of the world’s biggest trading firms. Now he’s betting on PointsBet."
Why this Wall Street billionaire just bought into an ASX minnow https://t.co/akd0UnLk4G
— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) June 20, 2022
Two summers ago, PointsBet entered a multi-year partnership with NBCUniversal under which the company became the network’s official sports betting partner. At the time, PointsBet U.S. CEO Johnny Aitken hailed the deal in touting the brand equity of NBC’s iconic peacock logo.
Aitken appears just as sanguine on PointsBet’s association with Yass and SIG Sports.
“We know that Jeff has been very interested to enter this space, and we’re excited that he sees PointsBet as a compelling long-term investment, as we continue to flex our competitive advantage in owning and operating our own technology,” Aitken said in a statement.