Susquehanna Makes $65 Million Wager on PointsBet

·3 min read

Finance giant Susquehanna has purchased 12.76% of PointsBet, making it the gambling operator’s largest shareholder.

PointsBet will issue 38.75 million new shares to SIG Sports, a unit of Susquehanna International Group, or SIG, at $1.68 ($2.43 AUS) per share, the company said Sunday in a filing with the Australian Securities Exchange. That’s a roughly 13% increase over PointsBet’s closing share price on Friday.

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In addition to the $65.2 million ($94.16 million AUS) investment, PointsBet announced that Nellie Analytics, which was founded by SIG, has entered into an agreement to provide technology and data to the company.

Susquehanna co-founder and managing director Jeff Yass said in a statement that the investment came after “several years” of studying the growing North American sports betting market. He added that he viewed the investment as a “long-term” opportunity.

“We have been following [PointsBet’s] journey for some time and have developed a very positive view of the overall business operations and the capability of the PointsBet leadership team,” Yass said. “We believe PointsBet has great potential for future growth and success in the North American sports betting market and SIG has both the analytics and capital to help realize that potential.”

The money should help PointsBet continue to grow its North American business, as new jurisdictions legalize wagering in both in the U.S. and Canada. While PointsBet is based in Melbourne, it has prioritized North America for business growth, and not necessarily in the same way that DraftKings and FanDuel have. While those companies are spending with the aim of eventually controlling huge chunks of the market, PointsBet executives have preached a more conservative marketing approach with a stated goal of eventually having about 10% market share. (It’s currently around 4% according to estimates from Eilers & Krejcik).

There are no changes to the PointsBet board as a result of the SIG investment, according to the filing.

The partnership with Nellie Analytics will be run through Banach Technology, a company that PointsBet purchased last year for $43 million in cash and stock. Under an initial exploratory agreement, Nellie will provide exclusive data services at no cost to PointsBet for a nine-month period, according to the filing. The plan is to eventually ink a long-term partnership.

PointsBet is hoping that Nellie’s technology in areas such as live betting and micro markets will improve its offering. While most major sportsbooks outsource a lot of those services to other companies, PointsBet has often discussed the advantages of owning its tech in-house. That has allowed the sportsbook, according to executives, to be more flexible in its offerings, and to ensure that its product is sufficiently differentiated from its competitors. Working with an outside company, albeit one owned by PointsBet’s largest shareholder, is at least a partial deviation from that approach.

Overall, it’s been a rough 12 months for publicly traded sports betting stocks, particularly in the U.S. The broader market shift away from growth companies has highlighted the huge costs operators are incurring to retain customers and attract new ones. Onerous tax requirements in states like New York, a critical market, and other market contractions have further stressed the business.

PointsBet, which is currently operating in 10 U.S. states, hasn’t avoided those concerns. The company’s stock is down about 70% this year. It closed Friday with a market cap of market cap of $374 million (AUS $540.33 million).

Headquartered in Pennsylvania, Susquehanna (or SIG) is one of the world’s largest closely held trading firms. It has additional business verticals that include an institutional brokerage, private equity and venture capital, structured capital and sports analytics. The firm has more than 2,300 employees worldwide.

The new shares will be issued under PointsBet’s existing placement capacity, according to the filing. They are expected to be quoted “on or around” June 17. The SIG shares include a voluntary lock-up period of 24 months, which can be shortened if the long-term partnership with Nellie doesn’t materialize.

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