Financial trading giant Susquehanna International Group (SIG) made waves last month when overnight it became the largest PointsBet shareholder.
SIG invested $66 million into PointsBet, but the deal extended beyond just cash. SIG subsidiary Nellie Analytics will also work with the sportsbook to develop the in-play product and take bigger bets with lower vig.
LSR caught up with SIG’s head of gaming David Pollard to discuss the investment and the company’s wider vision for sports betting.
LSR: Why is Susquehanna so interested in sports betting, given the relative size of the opportunity compared to options trading?
DP: There’s no doubt finance and options is our core business and always will be. But people here have always been interested in sports from a game theory and hobby perspective.
As for the industry, our experience of price discovery 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 that lines up with our interest and expertise.
LSR: How is sports betting handled internally? Is it all separated out in Nellie Analytics?
DP: It is a separate business. Nellie has been making 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 price.
The additional confidence will allow them to accept bigger wagers and more quickly. Eventually they will be able to reduce the juice as well. We definitely believe there is a need in the market for that and we can differentiate ourselves there.
LSR: How big could you take limits? Even the largest betting limits are small compared to the options market.
DP: That’s a discussion with PointsBet and their comfort level as well. We’re separate businesses.
With additional confidence in price, they’ll have a desire for larger wagers. It might take time to get integrated but we believe there’s an interest in the market.
LSR: What makes you so confident that bigger limits and lower juice is what customers want?
DP: It’s really a balance of appealing to the broadest base possible. You can have a lower-dollar retail player interested in same game parlays, then more serious players who are price-sensitive.
This is a strategy PointsBet were already pursuing, we just think we can help them get there more quickly with some improvements.
LSR: The initial partnership between PointsBet and Nellie is a nine-month exploratory agreement, which led some to question how keen PointsBet were to commit to that aspect of the deal. Were they?
DP: I think both parties are excited about that. The nine-month exploratory period is to get to know each other and line up teams.
Substantively meeting PointsBet was only recent. There’s a lot of time involved in working out details but the goal is to have a long-term agreement.
LSR: After the deal was announced, SIG co-founder Jeff Yass mentioned there was potential for funding further M&A for PointsBet. Do you have anything specific in mind?
DP: At this point, no. We have the capital to be opportunistic in a variety of ways.
Sports betting is a capital-intensive industry, especially going into new jurisdictions. This gives PointsBet the flexibility to go into new jurisdictions and compete from day one.
Historically that hasn’t always been the case. As for M&A, they will have the capital to be opportunistic if the right deal comes along.
LSR: Does this investment suggest Susquehanna thinks the bottom is in for sports betting stocks?
DP: It was more about finding the best way for us to access the market, not about where stock prices are.
We’ve been looking around for the right opportunity. We’ve been here since 2017 before PASPA was repealed. It was finding the right opportunity with the right firm to enter the US market. We bumped into Johnny Aitken a few years ago and liked their background, the way they looked at the industry.
LSR: Does Susquehanna plan to eventually have a controlling stake in PointsBet?
DP: Our goal is to increase our stake as the opportunity increases. We think it is a huge opportunity but there is nothing specific in terms of a percentage.