I believe it is largely due to reinvestment. Betfair have spent a lot of money recently on the World Cup and football markets and have been developing this area of the site. They have also been spending a lot in the US positioning themselves there such as buying TVG and setting up offices over there. Finally they will have been spending a lot on LMAX which launches soon. Without more detailed figures it is hard to say if profits are actually falling. I would be surprised if they were, if anything I would be expecting them to have gone up given that in the last year the PC effectively went up and we had a bumper summer of sport with it being a World Cup year.
Mark Davies has done an interesting blog post (http://www.markxdavies.com/2010/09/22/w ... ing/)about the BHA's response (https://www.britishhorseracing.presscen ... T-166.aspx) to the float. The BHA really are idiots and it pains me to say it but I kind of hope racing gets what it deserves! Aside from the float it is quite clear in the press release that just because you place lots of bets the BHA think you should be liable for the Levy, i.e. traders. Christ they are stupid.
Also from Mark's blog post it is interesting to read that Horse Racing fell from 80% of BF's revenues to around 20%, kind of what I expected but good to have some figures to back it up.
The analysis in the Telegraph basically backs up Peter's thoughts about the float that it is an exit strategy for the founders etc but on a limited scale seeing as they are continuing to hold most of their stake. Also that just because they aren't raising capital it isn't necessarily a bad thing.
Article:
http://www.telegraph.co.uk/finance/news ... loats.html
Comment:
http://www.telegraph.co.uk/finance/comm ... tfair.html
Betfair to play waiting game over flotation
i think that many institutions would see investing in betfair stock is something of a gamble in the long term.
So many high profile individuals and organisations in sport (not just racing)are "anti - laying". These high profile betting scandles that hit the headlines do BF no favors. It would just take some ill advised government legislation to make it either more expensive or impossible to lay(as is already the case in France I think) to destroy the original betfair model and make it just another bookies.
Better understanding and attitudes towards exchanges need to change , after all BF is a tremendous british success story.
So many high profile individuals and organisations in sport (not just racing)are "anti - laying". These high profile betting scandles that hit the headlines do BF no favors. It would just take some ill advised government legislation to make it either more expensive or impossible to lay(as is already the case in France I think) to destroy the original betfair model and make it just another bookies.
Better understanding and attitudes towards exchanges need to change , after all BF is a tremendous british success story.
The biggest question is price on the flotation front. If Betfair make £50m a year, then a valuation of £1.5bn will put them at 30 times earnings, which is very expensive. If Betfair didn't grow you would have to wait 30 years before seeing your investment covered. Of course they will growth so that puts the emphasis on growth. But they are not actually growing that fast any more.
We need to see the offer document before we get an idea on whether it is good value or not. I suspect it will not be good value and probably wouldn't make a decent investment.
We need to see the offer document before we get an idea on whether it is good value or not. I suspect it will not be good value and probably wouldn't make a decent investment.
Here are Betfair's latest results: -
http://corporate.betfair.com/investors/ ... cement.pdf
Commission generated (revenues) only rose 13% last year. They seem to indicate that revenues were up strongly thanks to the world cup, but that didn't start till the summer and these results are only to the end of April?!!??
The strongest growing line on their P&L is wages, marketing and admin costs. These have significantly outstripped revenue growth for a few years now. They appear to be spending more and more to get less growth. Net margins in the business peaked in 2006 and have been shrinking ever since.
http://corporate.betfair.com/investors/ ... cement.pdf
Commission generated (revenues) only rose 13% last year. They seem to indicate that revenues were up strongly thanks to the world cup, but that didn't start till the summer and these results are only to the end of April?!!??
The strongest growing line on their P&L is wages, marketing and admin costs. These have significantly outstripped revenue growth for a few years now. They appear to be spending more and more to get less growth. Net margins in the business peaked in 2006 and have been shrinking ever since.
Indeed.
I might short Betfair at its initial opening price, as I bet it's just a matter of time before the market realizes it's been sold a pony!
Jeff
I might short Betfair at its initial opening price, as I bet it's just a matter of time before the market realizes it's been sold a pony!
Jeff
Yantraman wrote: It would just take some ill advised government legislation to make it either more expensive or impossible to lay(as is already the case in France I think) to destroy the original betfair model and make it just another bookies.
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andyfuller
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From Scott Fergusons blog Andrew Black has stepped down:
http://www.sportismadeforbetting.com/20 ... tfair.html
http://www.sportismadeforbetting.com/20 ... tfair.html
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andyfuller
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I assume they are looking towards America and other countries opening up as the key growth areas, or perhaps LMAX as well?
I don't think Australia has been a great success to date and I suspect they will face even greater opposition from America so I would suspect that growth is going to be even more difficult/costly there. It would be interesting to see a breakdown of their business over time from country to country.
I don't think Australia has been a great success to date and I suspect they will face even greater opposition from America so I would suspect that growth is going to be even more difficult/costly there. It would be interesting to see a breakdown of their business over time from country to country.
Indeed - Presumably this is why they are pricing themselves at about 66 times their annual pre-tax profits...
Jeff
Jeff
andyfuller wrote:I assume they are looking towards America and other countries opening up as the key growth areas, or perhaps LMAX as well?
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andyfuller
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- Joined: Wed Mar 25, 2009 12:23 pm
Small equity offer could affect Betfair flotation
Potential investors in Betfair could be deterred by the relatively small amount of the business being put up for grabs, it was claimed yesterday.
A day after Betfair announced intentions to go ahead with an Initial Public Offering (IPO) from next month, market watchers called into question the decision to offer only around ten per cent of the business.
A flotation could value Betfair at £1.5 billion and put it among the biggest 250 companies quoted on the London Stock Exchange.
Yet, coming in a year when more thanhalf of the major IPOs in Europe have had shares trading below issue price and on the back of a drop in profits, the timing of the announcement surprised some analysts. There was also scepticism over the main purpose of the float, which is estimated to net founders Ed Wray and Andrew Black a multi-million-pound windfall.
Nick Bartram, an analyst with KBC Peel Hunt, said: "If only ten per cent of the equity is going to be released, a lot of people are going to be frustrated. Even if institutions like it a lot, they are not going to be able to get enough stock for it to be worthwhile.
"You will either get people putting in wild bids in the expectation they are going to be scaled down or some will feel it's not worth going for anyway because they won't get as much as they want. It does look as though it's happening all very quickly."
Simon Cawkwell, the renowned trader who is nicknamed Evil Knievel but is also a Betfair user who fought an unsuccessful legal action with the exchange over a football bet, said: "It's interesting the sole purpose of this flotation is not to raise money, it's to enable existing shareholders to sell. In classic stock market analysis terms that has always been a no-no.
"The central point is this is not a new money job where the management stay in. This is an opportunity for the management to get out. However you look at it, that's a long-standing stock market fact of life."
As a cash-rich and profitable business with no debt, Betfair hopes it can buck the trend of recent flotations like the home delivery service Ocado, which has performed poorly despite slashing the price of shares for an IPO in July.
Bartram, who specialises in the gaming sector, said: "Betfair has been a phenomenal success story. The question now is, will the market come on board and will they get the valuation they want and have we seen the spectacular growthon what's left? I've got an open mind.
"Packaged in the right way, at the right price, a Betfair flotation can ultimately be a successful one. That price will be determined by how much growth people think is left in the business - the existing core exchange business, the new markets, overseas markets with new regulations coming which may or may not provide opportunities for the company.
"Potential threats are the bookies, whokeep bleating about taxation and unfair competition from betting exchanges.
"In principle, it's a very interesting IPO candidate. It's been a fantastic success and UK institutions generally are under weight in the gaming area. Ladbrokes and William Hill have hardly been great successes in terms of bottom-line profit growth over the last few years. I hope it is priced sensibly."
Betfair hope a public listing will ease the company's entry into overseas markets, but if it does it could find its monopoly position under threat - particularly in the States, according to Cawkwell.
"I still think the Americans will imitate them," he added. "It's very hard to believe that there aren't computer and gaming groups that can't compete with Betfair in America."
Source: http://www.thoroughbrednews.com.au/inte ... 1&keyword=
Potential investors in Betfair could be deterred by the relatively small amount of the business being put up for grabs, it was claimed yesterday.
A day after Betfair announced intentions to go ahead with an Initial Public Offering (IPO) from next month, market watchers called into question the decision to offer only around ten per cent of the business.
A flotation could value Betfair at £1.5 billion and put it among the biggest 250 companies quoted on the London Stock Exchange.
Yet, coming in a year when more thanhalf of the major IPOs in Europe have had shares trading below issue price and on the back of a drop in profits, the timing of the announcement surprised some analysts. There was also scepticism over the main purpose of the float, which is estimated to net founders Ed Wray and Andrew Black a multi-million-pound windfall.
Nick Bartram, an analyst with KBC Peel Hunt, said: "If only ten per cent of the equity is going to be released, a lot of people are going to be frustrated. Even if institutions like it a lot, they are not going to be able to get enough stock for it to be worthwhile.
"You will either get people putting in wild bids in the expectation they are going to be scaled down or some will feel it's not worth going for anyway because they won't get as much as they want. It does look as though it's happening all very quickly."
Simon Cawkwell, the renowned trader who is nicknamed Evil Knievel but is also a Betfair user who fought an unsuccessful legal action with the exchange over a football bet, said: "It's interesting the sole purpose of this flotation is not to raise money, it's to enable existing shareholders to sell. In classic stock market analysis terms that has always been a no-no.
"The central point is this is not a new money job where the management stay in. This is an opportunity for the management to get out. However you look at it, that's a long-standing stock market fact of life."
As a cash-rich and profitable business with no debt, Betfair hopes it can buck the trend of recent flotations like the home delivery service Ocado, which has performed poorly despite slashing the price of shares for an IPO in July.
Bartram, who specialises in the gaming sector, said: "Betfair has been a phenomenal success story. The question now is, will the market come on board and will they get the valuation they want and have we seen the spectacular growthon what's left? I've got an open mind.
"Packaged in the right way, at the right price, a Betfair flotation can ultimately be a successful one. That price will be determined by how much growth people think is left in the business - the existing core exchange business, the new markets, overseas markets with new regulations coming which may or may not provide opportunities for the company.
"Potential threats are the bookies, whokeep bleating about taxation and unfair competition from betting exchanges.
"In principle, it's a very interesting IPO candidate. It's been a fantastic success and UK institutions generally are under weight in the gaming area. Ladbrokes and William Hill have hardly been great successes in terms of bottom-line profit growth over the last few years. I hope it is priced sensibly."
Betfair hope a public listing will ease the company's entry into overseas markets, but if it does it could find its monopoly position under threat - particularly in the States, according to Cawkwell.
"I still think the Americans will imitate them," he added. "It's very hard to believe that there aren't computer and gaming groups that can't compete with Betfair in America."
Source: http://www.thoroughbrednews.com.au/inte ... 1&keyword=
If a company's worth investing in, you'd have thought that the fact that £150 million of shares are up for grabs would be enough to pique investment banks' interest.andyfuller wrote: Potential investors in Betfair could be deterred by the relatively small amount of the business being put up for grabs, it was claimed yesterday.
And if I were an investor, I would interpret the fact that 90% of the shares aren't for sale as a sign that people in the know have confidence in Betfair.
According to Wikipedia, he laid Nial Quinn becoming permanent manager and lost, even though Quinn stated he was only taking the job temporarily.andyfuller wrote:
Simon Cawkwell, the renowned trader who is nicknamed Evil Knievel but is also a Betfair user who fought an unsuccessful legal action with the exchange over a football bet.
Just a few weeks later, Roy Keene took the job!
I somehow can't see a US official thinking 'I was a little apprehensive about allowing Betfair to operate over here, but now they've sold 10% of the company to some investment banks, my mind is at ease!'.andyfuller wrote:
Betfair hope a public listing will ease the company's entry into overseas markets.
Jeff
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andyfuller
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From tonight's Q&A:
Betfair Live Chat 23 Sep 10 18:07
We have received several questions in respect of Betfair's announcement on Tuesday of its intention to list on the London Stock Exchange and its proposed initial public offering (IPO). We know that a number of customers have expressed interest in investing in the IPO. We did explore in some detail the possibility of making it available to our customers but unfortunately due to legal and regulatory difficulties we were not able to pursue this. Due to the strict regulations surrounding the listing process, we are sorry that we will not be able to answer any further questions on this topic.
Betfair Live Chat 23 Sep 10 18:07
We have received several questions in respect of Betfair's announcement on Tuesday of its intention to list on the London Stock Exchange and its proposed initial public offering (IPO). We know that a number of customers have expressed interest in investing in the IPO. We did explore in some detail the possibility of making it available to our customers but unfortunately due to legal and regulatory difficulties we were not able to pursue this. Due to the strict regulations surrounding the listing process, we are sorry that we will not be able to answer any further questions on this topic.
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andyfuller
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- Joined: Wed Mar 25, 2009 12:23 pm
A slightly different take on not offering shares to those that made BF what it is:
http://www.thisislondon.co.uk/standard- ... betfair.do
http://www.thisislondon.co.uk/standard- ... betfair.do
An interesting piece this morning :-
http://www.google.com/url?sa=X&q=http:/ ... WziddXQPig
Regards
Peter
http://www.google.com/url?sa=X&q=http:/ ... WziddXQPig
Regards
Peter