Fanatics set to acquire Pointsbet's U.S. sports betting operations in $150 million deal

Yahoo Finance Live discusses Michael Rubin led sports-apparel business Fanatics acquisition of Pointsbet's U.S. sports betting operations in $150 million deal

Video transcript

- All right, another thing I've been keeping my eyes on today, guys, is the sports betting space as Michael Rubin and Fanatics have officially made their move into sports gambling. So the private company, mostly known for their sports apparel business, has entered into an agreement to buy PointsBet USA. The $150 million purchase will provide Fanatics with access to licenses for mobile sports wagering in more than 15 states.

But really what caught my eye here, we can talk about Rubin and Fanatics getting into sports gambling, I think it's fascinating. $150 million for access to 14 states in licensing? If I told you that in 2019 and 2020, for people that followed the space, they would be very surprised. That is an undervaluation compared to what we saw several years ago. I had people tell me that today. And I think what's interesting to see with that is essentially, what more consolidation do we see?

Seana, I know we've talked about this a lot with DraftKings in the past and FanDuel and sort of that market domination you're seeing at the top. Well, now, you're seeing as valuations drop, who do some of these bigger companies try and scoop up? And it feels like we're just talking about three or four players at the top and everyone else is out.

SEANA SMITH: We are, which I think is something that didn't necessarily catch us by surprise, given the fact that some of those names have such a strong hold on this market. And also there's just questions about the growth here and what that is exactly going to look like over the next couple of years, just in terms of additional states coming online, what exactly that looks like, even for the larger players within the space. Whether or not Fanatics is going to be successful in this, I have a lot of questions, just in terms of their ability to compete with so many of those players that do have that larger footprint.

- Yeah, what really surprised me as I was diving into this is that year-to-date shares of DraftKings are up more than 100%, right now up 106%. So the excitement is still there, but also, as I looked into this, is that yesterday marked five years since that Supreme Court ruling that ultimately allowed gambling on sports. That was an overturn from a ruling back in 1992, a law that when it went into effect then.

And so, ultimately, this reversal that we've seen over the past five years, the excitement seems to be still there based upon how shares are performing of DraftKings, but in addition to that, I found a quote from the late Ruth Bader Ginsburg. And she said that there is no cause to deploy a wrecking ball, and I just found that so fitting for this exact moment. We are just seeing so many players get into the space, and perhaps a wrecking ball that she said.

DIANE KING HILL: That pun intended. "So many players in this space."

[LAUGHTER]

And some consolidation of the players. Some people making the draft, some not in this space.

- Tons of puns that could be used.

DIANE KING HILL: But yes, no, you make a good point about just what has happened within this space. I mean, once upon a time, it just was not legal, and then the acceleration. But we've seen some slowdown in terms of, as you mentioned, the states adopting legalized betting. It's not going to be the pace that we've seen in the past couple of years.

I mean, only a couple of states set to come online with legalized sports betting. And you know, so, there are some headwinds in that respect.

- And what's really going to happen here too is Fanatics is going to play a big role in that profitability story we're talking about with these sports books, right? Because now you're bringing in a company that wants to spend when you've had companies trying to cut back on spending to acquire customers. So I think that's the looming question that we leave here today with on this story is, how much can Fanatics disrupt the space that feels like it has been headed toward a little bit of consistency?

SEANA SMITH: What is the thought process out there, though, just in terms of how big of a threat? Are they even a threat to DraftKings?

- Michael Rubin says he wants to spend a billion dollars. If he wants to spend a billion dollars, then he's probably going to take some market share from DraftKings or FanDuel, right? And he has 94 million customers that are Fanatics customers that they have direct email access to. So they have the market, it's just whether or not they can bring people over.