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Pointsbet (ASX:PBH) share price soars on DraftKings US update

The Pointsbet Holdings Ltd (ASX:PBH) share price has jumped 18% after the online sports betting business revealed a DraftKings update.

The Pointsbet Holdings Ltd (ASX: PBH) share price has jumped 18% after the online sports betting business revealed an update regarding DraftKings.

Pointsbet describes itself as a corporate bookmaker listed on the ASX with operations in Australia, the US, Canada and Ireland. It has a cloud-based wagering platform where it offers clients innovative sports and racing wagering products.

Pointsbet to sell US business?

In mid-May it announced that Pointsbet US was to be sold to Fanatics Betting and Gaming for US$150 million, with an intention to distribute the net sale proceeds and majority of corporate cash to shareholders.

It would still own its Australian trading business and growing Canadian trading business, as well as its platform, and a perpetual royalty-free license to exploit its Banach technology assets, with the potential to utilise these assets into geographic regions outside the US.

Last week, Pointsbet received a takeover offer from DraftKings for a headline purchase price of US$195 million on a debt-free and cash-free basis, with no financing condition, though this wasn’t a binding offer.

Today, the company announced that after considering the offer, the board have determined that the DraftKings proposal could be “reasonably expected to lead to a superior proposal.” A stronger proposal is helpful for the Pointsbet share price.

Pointsbet will now engage with DraftKings on the proposal, though there is no guarantee this will result in a binding definitive agreement. It will give DraftKings due diligence materials.

At this stage, the board is continuing to recommend that shareholders vote in favour of the proposal made by Fanatics Betting and Gaming, with the extraordinary general meeting scheduled for 30 June 2023 while it considers the DraftKings proposal.

Final thoughts on the Pointsbet share price

I wouldn’t expect that the DraftKings proposal will definitely go ahead. Pointsbet said to DraftKings:

In light of the anticipated heightened scrutiny of an acquisition of PointsBet by DraftKings, as compared to the FBG Transaction, please provide written confirmation that DraftKings will assume the risk of delay and/or denial of antitrust approvals, as we intend to hold DraftKings to a “hell or high water” standard with respect to antitrust clearances.

It’d be a shame for Pointsbet to lose the US segment, as it’s a huge market, but the cash would be useful for Pointsbet. There are other ASX growth shares I would rather buy where future profit is more certain.

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