It seems the crux of my thesis is slowly deteriorating. The market in the US for mobile sports betting is opening up rapidly, the competition is eating away at PBH market share. I assumed with their NBC deal they would be able to maintain or even grow market share, however this appears not to be the case (at least for the time being). Its too easy for new competitors to pop up over night and cut their lunch. Cashburn is also crazy high and probably end up around $200m for the full year, which means even though they have around $600m of cash, they will likely do another capital raise in the next 2 years. And while burning this much cash you don't like to see your market share fall away. I will be selling my holding. If the price gets cheap enough for me to factor only a 2.5% market share and cashburn slows down, I may look at this one again. But for now I walk away with tail between my legs.

A small update from Pointsbet today:-

PBH also note that following authorisation from the New York State Gaming Commission (NYSGC), Poinstbet New York has commenced pre-registeration of New York residents.

It is anticipated that Pointsbet will launch sportsbook operations in New York by the end of January 2022, following receipt of the required final approvals from the NYSGC.

This is a massive market opportunity for Pointsbet. New York state has approx. 20mill population.

PointsBet launches operations in US state of Virginia

PointsBet has launched mobile and sports betting in the US state of Virginia, marking the eighth American state in which the Melbourne-based company now operates. Virginia is the 12th most populous US state with over 8.5m population.

The company also operates in New Jersey, Iowa, Indiana, Illinois, Colorado, Michigan, and West Virginia.

Management said - “As the official, exclusive sports betting partner of NBC Sports, PointsBet will also utilise the media giant’s premium television and digital assets to promote the PointsBet brand in the state of Virginia across its local sports communities,”.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02467448-3A583877?access_token=83ff96335c2d45a094df02a206a39ff4

While I'm still bullish on the company overall and the massive market in front of them. While active users are growing nicely, they actually have lost some market share. This isn't great for my thesis where I forecast them holding onto 5% market share or increasing. Ill be watching this metric closely, Im hoping now the NFL season has started this will bounce back and its just a seasonal low quarter. But we will have to wait and see, the space is very competitive.

Pointsbet has gained regulatory approval in West Virginia. West Virginia is a relatively small state population wise of approx. 1.8m people. Nevertheless, slowly but surely the USA is opening up to online sports betting. This marks PBH's 7th operational state. They already have operations in New Jersey, Iowa, Indiana, Illinois, Colorado and Michigan. So currently only serving about 15% of the population. IMO the risk vs reward for PBH at current share price is great, when you consider the huge market opportunity ahead. 

Another capital raising for Pointsbet. I expect this to be a frequent occurence as the US opens more states to sportsbetting and PBH will keep tapping the market to fund the expansion. Which isnt a problem if the growth is there and they arent burning cash without the returns. See announcement below:-

PointsBet Announces Capital Raising to Strengthen its Balance Sheet for Long Term Success

Melbourne, Australia, 29 July 2021 - PointsBet Holdings Limited (ASX:PBH) ("PointsBet" or the "Company") today announces an underwritten capital raising of approximately A$400 million comprising:

•             a fully underwritten 1 for 9 accelerated pro rata renounceable entitlement offer, with retail rights trading to raise approximately A$184.9 million at A$8.00 per share (the "Entitlement Offer Price") (the "Entitlement Offer"); and

•             a fully underwritten institutional placement to raise A$215.1 million ("Placement")1. The Placement price will be at a fixed price of A$10.00 per share (the "Placement Price"),

(together, the "Capital Raising").

Purpose of the Capital Raising

Consistent with its objective of consolidating and expanding upon its strong position in the rapidly expanding US sports betting and iGaming market, PointsBet is undertaking this Capital Raising to provide funding to support:

·        North American marketing and client acquisition;

·        Technology and product development (sports betting and iGaming); US market access and government licensing fees;

·        Continued investment in talent and scale of operations; and Balance sheet flexibility.

PointsBet's Managing Director and Group CEO, Sam Swanell, said: "Since inception, PointsBet's Board and management have been working to establish and consolidate the key building blocks that have put us in the strong position we are today to pursue the expansion of the North American sports betting and iGaming opportunity.

"Today, in addition to our profitable Australian business, we have live operations in 6 US States with iGaming live in two of these states. By December 2022 we plan to be live in at least 19 North American states or provinces. The North American sports betting and

iGaming market could be a US$54bn revenue opportunity by 2033 and our strategy is to continue to invest to become a top 5 player in this market, targeting a 10% market share in all key North American jurisdictions. The Capital Raising will position PointsBet to execute this strategy."

Details of the Capital Raising Placement

The Placement will raise approximately A$215.1 million. The Placement is being undertaken utilising the Company's existing Placement capacity under Listing Rule 7.1.

The Placement will be conducted at the fixed price of A$10.00 per New Share, representing a discount of 11.4% to the A$11.29 closing price of PointsBet on ASX on Wednesday, 28 July 2021.

Allocations under the Placement will be determined on behalf of PointsBet by an independent sub-committee of its Board in consultation with the Joint Lead Managers and financial adviser.

It is intended that eligible shareholders, who bid for up to their 'pro-rata' share of new shares under the Placement, at the final price, will be allocated their full bid, on a best endeavours basis. For the remaining shares under the Placement, the Company will seek to prioritise allocations to existing shareholders and then introduce new shareholders, in each case based on factors including likelihood of long-term support, the strategic alignment of the investor, support to date and the size and timeliness of bids into the book.

Entitlement Offer

Eligible shareholders under the Entitlement Offer will be able to subscribe for 1 New Share for every 9 shares held ("Entitlements") at 7:00pm (AEST) on Wednesday, 4 August 2021 ("Record Date") at the Entitlement Offer Price.

The Entitlement Offer Price represents a 26.5% discount to the theoretical ex­ entitlement price (TERP - including New Shares issued via the Placement) of A$10.882 based on the A$11.29 closing price of PointsBet on ASX on Wednesday, 28 July 2021.

The Entitlement Offer comprises:

•             an Institutional Entitlement Offer: Eligible institutional shareholders will be entitled to participate in the Institutional Entitlement Offer which will take place from Friday, 30 July 2021 to Saturday, 31 July 2021. Eligible institutional shareholders can choose to take up all, part or none of their Entitlements. Entitlements that eligible institutional shareholders do not take up by the close of the Institutional Entitlement Offer, and Entitlements that would otherwise have been offered to ineligible institutional shareholders, will be sold through an institutional shortfall bookbuild that will open on Monday, 2 August 2021 and any proceeds in excess of the Entitlement Offer Price will be paid to the relevant PointsBet shareholders (net of any withholding tax and expenses).

•             a Retail Entitlement Offer: Eligible retail shareholders in Australia and New Zealand will be entitled to participate in the Retail Entitlement Offer at the same price as the Institutional Entitlement Offer (A$8.00 per New Share). Eligible retail shareholders have a number of options under the Retail Entitlement Offer:

-              elect to take up all or part of their Entitlements by the Retail Entitlement Offer closing date of 5:00pm (AEST) on Friday, 20 August 2021;

-              sell their Entitlements, including on ASX, between Wednesday, 4 August 2021 and Friday, 13 August 2021; or

-              do nothing and let their Entitlements be offered for sale through a retail shortfall bookbuild process on Wednesday, 25 August 2021 managed by the Joint Lead Managers with any proceeds in excess of the Entitlement Offer Price paid to the relevant PointsBet shareholders (net of any withholding tax and expenses).

Entitlements that would otherwise be offered to ineligible retail shareholders will be sold through a retail shortfall bookbuild on Wednesday, 25 August 2021 and any proceeds in excess of the Entitlement Offer Price will be paid to the relevant PointsBet shareholders (net of any withholding tax and expenses).

PointsBet Chairman, Brett Paton, has indicated that he will be participating in the Entitlement Offer for approximately A$6.0 million of his eligible Entitlements.