PointsBet Dips Below IPO Price as Sports Postponements Mount, Company Allays Liquidity Concerns

Posted on: March 13, 2020, 09:47h. 

Last updated on: March 13, 2020, 11:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

PointsBet Holding Ltd. (ASX:PBH), the Australian bookmaker with significant US exposure, saw its stock briefly slide below its initial public offering (IPO) price during Sydney trading Friday. That’s as investors grow increasingly concerned about the spate of athletic leagues and events that are being canceled, delayed, or suspended because of the coronavirus.

With sports cancellations mounting around the world, PointsBet stock was volatile on Friday. But the company has cash to weather the storm. (Image: Yahoo News)

On Friday, the stock opened at AU$2.10 and immediately tumbled below AU$2, the June 2019 IPO price. It then rebounded to close at AU$2.40, down 7.34 percent on the day, according to Bloomberg data. That’s a wide intraday range for a low-priced stock such as PointsBet, and one that underscores that volatility that is wracking gaming equities on the back of the COVID-19 pandemic.

With global equities plunging this month, market participants are fretting about the ability of companies – regardless of industry – to access capital should a recession hit. On Friday, PointsBet overtly highlighted its strong cash position.

As of 31 December 2019, PointsBet had AU$147.9 million of corporate cash on the balance sheet, the majority of which is held in USD,” according to a statement. “The Company has no borrowings.”

That’s an impressive cash position for a company with a market capitalization of AU$366.80 million.

Cancellations Crimp PointsBet Stock

PointsBet offers traditional fixed odds betting and has become popular with some gamblers for its “Pointsbetting” platform, which tests bettors’ acumen against a published spread. For example, a gambler putting down $100 on a 10-point favorite that wins by 20 would net $1,000, or $100 for each extra point by which the spread was covered. Conversely, the bettor would lose $900 if the favorite won the contest by just a single point.

The allure of “Pointsbetting” has taken a hit in the current environment for a simple reason: sportsbooks have almost nothing to take action on this weekend, and a small slate for the foreseeable future.

This week, the NBA – one of the most wagered-on sports in the US – suspended its season, with the NHL following suit. Various college conferences scrapped postseason basketball tournaments, with the NCAA saying March Madness on the men’s and women’s sides will be canceled because of the coronavirus. The NCAA Men’s Tournament is one of the most bet-on sporting events in the US.

The PGA canceled the Players Championship, and Augusta National Chairman Fred Ridley said earlier today the Masters – one of golf’s four major events – is being postponed.

Damage Done

There’s no refuting that the COVID-19 pandemic has punished PointsBet stock, sending it lower by 60.6 percent over the past month. But management claims it’s staying abreast of the virus situation.

“Management continues to monitor communications from Australian racing bodies, global sporting leagues, and other relevant stakeholders in this regard,” according to the statement.

In the U.S., PointsBet has operations in Iowa, New Jersey, and New York, and recently added Michigan. The company will add Colorado to its US roster when sports betting goes live there on May 1.