Racing reliance cited as a weakness in fight for PointsBet

A high reliance on racing customers has been cited as one of the reasons for PointsBet’s latest rejection of an acquisition by its rival betr, as its board maintained support for the offer by MIXI.

In the latest exchange of releases via the ASX, PointsBet reaffirmed its recommendation that its shareholders accept the all-cash offer from Japanese-owned MIXI, whose off-market bid of $1.20 per share opened on Tuesday.

One of the reasons PointsBet raised in its rejection should prick the ears of industry observers and racing bodies, with betr’s higher dependence on net win from its racing customers cited as a weakness in any acquisition play.

PointsBet, which undertook a period of due diligence on betr during a protracted takeover battle, described betr’s sports business as “sub-scale” saying it had an unattractive product mix.

“Betr’s business is heavily skewed towards racing, with 85 per cent of its net win derived from racing products,” Pointsbet said, citing an eight-month period up until April 2025.  

“Sports is the growth category for the industry where there is material year-on-year growth in active clients.

“Product fees for thoroughbred racing are relatively high, which means gross profit margins are considerably lower than sports for like-for-like products (i.e. pre-race / pre-sports fixed price single bets) despite thoroughbred racing having higher like-for-like net win margins.

“Relative to sports, there are fewer opportunities to innovate and develop high-margin, recreational products (e.g. same game multis) which are attractive to mass market customers.”

While PointsBet’s perspective on the value of racing as a betting medium to bookmakers comes as no surprise, given its previously stated aim of building growth in sports, it lays out in black and white the challenges faced as racing cedes significant market share to sports betting.

Turnover on the regulated sports betting market in Australia grew from $1 billion in 2001 to over $13 billion in the most recently released figures in 2021. Over the same period, betting on thoroughbred racing in Australia increased from $9.6 billion to $29.1 billion, but has since receded by an estimated 20 per cent.

PointsBet has previously said its market split is moving towards 50/50 sports and racing, while the likes of social-oriented player Dabble are already heavily weighted towards sports.

Meanwhile, PointsBet’s board also claimed that betr’s net win was generated from a small subset of VIP players, saying its due diligence had revealed that half of betr’s net win was built from just 20 customers.

It raised compliance concerns, sustainability, and variance as three major concerns with this customer mix, while also pointing to evidence of higher client churn than PointsBet.

“Product fees for thoroughbred racing are relatively high, which means gross profit margins are considerably lower than sports for like-for-like products (i.e. pre-race / pre-sports fixed price single bets) despite thoroughbred racing having higher like-for-like net win margins” – PointsBet

Overlap is also cited as another PointsBet board concern. It said 65 per cent of current turnover comes from punters of both brands, something which would inhibit the value of combining the customer base.  

More broadly, the PointsBet board said it did accept the characterisation of betr’s unsolicited offer as superior to that of MIXIs.

Betr is yet to reply to these claims.

Despite multiple knockbacks from the PointsBet board, betr has stayed in the fight for PointsBet. It acquired 19.6 per cent of the company in early May, and then successfully appealed against a shareholder vote last month, which initially approved the MIXI deal, only for it to be overturned after a systems error impacted the voting process.

Despite the saga, MIXI, which has a small presence in Australia through betM, has remained on the front foot and has recently secured access to a 9.15 per cent interest in PointsBet, which, along with the shares held by the PointsBet board, gives it over 17 per cent influence.

MIXI’s all-cash offer values PointsBet at over $400 million and will remain open until August 25. It requires 50.1 per cent shareholder support to proceed.