Susquehanna Gaming Head On Betting Limits, Further PointsBet M&A

Financial trading giant Susquehanna International Group (SIG) made waves last month when it became the biggest overnight Points Bet shareholder.

SIG invested $66 million in PointsBet, but the deal went beyond cash. SIG subsidiary Nellie Analytics also works with the sportsbook to developing the in-play product and take bigger bets with a lower vig.

LSR caught up with SIG’s head of gaming David Pollard to discuss the investment and the company’s broader vision of sports betting.

LSR: Why is Susquehanna so interested in sports betting, given the relative magnitude of the opportunity compared to options trading?

DP: Financing and options are undoubtedly our core business and always will be. But people here have always been interested in sports from a game theory and hobby perspective.

In terms of the industry, our experience discovering prices in financial markets and evaluating large amounts of data in real time is analogous to in-play betting. The market is shifting from pregame to in-play and we think this aligns with our interest and expertise.

LSR: How are sports betting handled internally? Is it all separated in Nellie Analytics?

DP: It’s a separate company. Nellie has been creating markets on the Betfair Exchange and Matchbook in Europe since April 2017. The plan is to share that expertise with PointsBet to give them more confidence in their prize.

The added confidence allows them to accept bigger and faster bets. Eventually they will also be able to reduce the juice. We certainly believe that there is a need for this in the market and can distinguish ourselves there.

LSR: How big could you take limits? Even the largest betting limits are small compared to the options market.

DP: That is also a discussion with PointsBet and their comfort level. We are separate companies.

With added confidence in the prize, they will have a desire for bigger bets. It may take some time to integrate, but we believe there is interest in the market.

LSR: What makes you so confident that customers want bigger limits and less juice?

DP: It’s really a balance between appealing to the widest possible base. You can have a lower dollar retail player interested in the same game parlays than more serious players who are price sensitive.

This is a strategy that PointsBet has been pursuing, we just think we can help them get there faster with some improvements.

LSR: The first partnership between PointsBet and Nellie is an exploratory nine-month deal, which has left some wondering how eager PointsBet would be to commit to that aspect of the deal. Were they?

DP: I think both parties are excited about that. The nine-month exploration period is to get to know each other and set up teams.

In terms of content, meeting PointsBet was only recent. A lot of time goes into working out details, but the goal is to have a long-term agreement.

LSR: After the deal was announced, SIG co-founder Jeff Yass said there was potential for further M&A financing for PointsBet. Do you have something specific in mind?

DP: Right now, no. We have the capital to be opportunistic in various ways.

Sports betting is a capital intensive industry, especially when it comes to new jurisdictions. This gives PointsBet the flexibility to enter new jurisdictions and compete from day one.

Historically, this has not always been the case. As for mergers and acquisitions, they will have the capital to be opportunistic if the right deal comes along.

LSR: Does this investment suggest that Susquehanna thinks the bottom has been reached for sports betting stocks?

DP: It was more about finding the best way for us to access the market, not where the stock prices are.

We looked around for the right opportunity. We have been here since 2017 before PASPA was withdrawn. It was finding the right opportunity with the right company to enter the US market. A few years ago we ran into Johnny Aitken and we loved their background, the way they looked at the industry.

LSR: Does Susquehanna plan to eventually own a majority stake in PointsBet?

DP: Our goal is to increase our commitment as the opportunity increases. We think it’s a huge opportunity, but there’s nothing specific in terms of a percentage.

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