Is PointsBet The Next Sports Betting Acquisition By Penn National?

The growth of online sports betting in the United States is creating opportunities for companies in the sector.

Many analysts and industry experts have also predicted consolidation in the sports betting market. A recent minority investment by a larger sports betting company could foreshadow a buyout down the road.

What Happened: The consolidation trend beginning to take shape with Penn National Gaming, Inc.'s PENN acquisition of Score Media and Gaming Inc SCR and Draftkings Inc DKNG acquisition of Golden Nugget Online Gaming Inc GNOG.

The acquisition of Score Media had been mentioned for years as Penn National had taken a 4.7% equity stake in the company via a deal that gave the Canadian company access to some of Penn’s casino markets.

On Sept. 10, Penn National acquired a 6.27% stake in PointsBet Holdings Ltd PBTHF, a leading Australian sports betting company that launched in the U.S. in 2019.

Penn National converted options from 2019 that were set to expire on Sept. 12. Penn is now the top shareholder of PointsBet.

Related Link: 3 Sports Betting Stocks That Could Get Bought Out Next 

About PointsBet: Founded in 2015, PointsBet is a leader in sports betting in Australia and has gained a share in the U.S. since launching in January 2019.

The company has operations in Illinois, Michigan, New Jersey, Indiana, Colorado, Iowa and West Virginia.

PointsBet had revenue of $194.66 million in fiscal 2021, up 159% year-over-year. The company had over 350,000 cash active clients and over 45 million bets placed in fiscal 2021, which ended June 30, 2021.

Why It’s Important: In Michigan, one of the largest legalized U.S. states for online sports betting, Penn National Gaming’s Barstool Sportsbook has struggled and lost market share. The company’s share went from 23.9% and 13.3% in January and February respectively to 7.1% in June. Barstool Sportsbook gained market share to hit 7.2% in July.

PointsBet ranked right behind Barstool Sportsbook in Michigan for July with $7.85 million in betting handle compared to $13.62 million for Barstool.

A combination of the two companies could help Penn National gain market share after being pushed to fourth or fifth place in many states it competes in.

PointsBet also has in-house technology that powers the front end and back end of sports betting technology. A trend in the industry has been to acquire companies for their technology to help cut costs.

In August 2020, PointsBet signed a five-year deal with NBC Sports, a unit of Comcast Corporation CMCSA, to be the official sports betting partner.

PENN Price Action: PENN shares are down 2.81% to $76.63 on Tuesday afternoon.

Photo: Jason Strull via Unsplash