Betfair set float price

[andyfuller]

So say there were 100 shares in circulation, meaning 100% of the company was owned by the public, if the company does as BF have done and say buy back and cancel 20 shares rather than now there only being 80% of the company in public ownership and 20% back in the ownership of the company, there is still 100% of the company owned by the public but now rather than each share representing 1% of the company they now represent 1.25% of the company?

Is that correct? If so I don't see the point in it bar to prop up a share price for a short period? I must be missing something...

[Iron]

Is Betfair's thinking possibly 'The shares are undervalued at the moment, so it makes sense for us to buy them whilst they're cheap, and sell if and when the market returns to the true value'?

Jeff

[andyfuller]

So say there were 100 shares in circulation, meaning 100% of the company was owned by the public, if the company does as BF have done and say buy back and cancel 20 shares rather than now there only being 80% of the company in public ownership and 20% back in the ownership of the company, there is still 100% of the company owned by the public but now rather than each share representing 1% of the company they now represent 1.25% of the company?

Is that correct? If so I don't see the point in it bar to prop up a share price for a short period? I must be missing something...

Seems from a quick bit of reading that the above is correct....surely they would be far better to have spent the ~£1.5m (with £48.5m of buying back still to go) on attracting new customers or developing the site/business.

I don't see how this share buy back does anything than to falsely prop up the share price. Would be interest to hear your views Peter as on my quick read up I read Buffet likes buy backs.

[andyfuller]

Is Betfair's thinking possibly 'The shares are undervalued at the moment, so it makes sense for us to buy them whilst they're cheap, and sell if and when the market returns to the true value'?

Once cancelled they can't be sold back can they? As for them being value.....

[Iron]

I don't know the law surrounding the issue, but I don't see why not.

I'd have thought Betfair buying x% of their shares is no different to you or I buying x% of their shares, ie if the price rises, there's nothing to stop us selling the shares to the market.

Re: Value - Time will tell. I think Betfair have gone about as far as they're going to go with the UK market, but the question remains unanswered as to how well they'll do abroad...

Jeff

Once cancelled they can't be sold back can they? As for them being value.....

[andyfuller]

Betfair shares down 50pc since float last year

Shares in Betfair, the online gaming exchange, have fallen by over 50pc since the group floated nine months ago.

Betfair shares fell to an all-time low of 646½p on Monday

By Jonathan Sibun6:15AM BST 12 Jul 2011

The embattled company's shares fell to an all-time low of 646½p on Monday, against a float price of £13.00, confirming its position as one of the worst performing major flotations in recent years. The shares subsequently recovered some ground to close down 22 at 660p.

The share price decline came after analysts at Espirito Santo and UBS downgraded their forecasts for the betting company, sparking further concerns among jittery investors.
The price cuts follow Betfair's recent full-year results and concerns about regulatory changes in Europe.

In a critical note, Espirito analysts lowered their target price on the stock to 630p as they said "Betfair's updated growth strategy is effectively turning it into a conventional bookmaker over time, diluting the original exchange proposition" and claimed the "business is reaching maturity and competition is intensifying."

The analysts also raised concerns about "regulatory risks outside the UK" and rising commission charges for Betfair's higher value customers.

UBS analysts took a similar line. "Betfair's results and the ensuing consensus EPS [earnings per shares] downgrades highlight the lack of underlying growth in the business," they wrote, lowering their share price target from 775p to 660p.

The UBS analysts lowered their EPS forecasts by nearly a third for the 2012 financial year and by 27pc for 2013, while keeping their sell recommendation on the stock.

The negative comments came despite reports in Germany that regulators are set to tell state authorities to redraft gaming laws that looked set to hurt Betfair's business.

Greece could also republish draft gaming laws in a move that would be expected to help boost Betfair's opportunities in the country.

Source: http://www.telegraph.co.uk/finance/news ... -year.html

[andyfuller]

I'd have thought Betfair buying x% of their shares is no different to you or I buying x% of their shares, ie if the price rises, there's nothing to stop us selling the shares to the market.

From how I read what Peter said and what I have quickly read on the internet when they are bought for cancellation they are taken out of circulation so there is nothing to sell back as they don't exist any more. Hence the remaining shares representing a higher ownership %.

[Iron]

There might be better

Greece could also republish draft gaming laws in a move that would be expected to help boost Betfair's opportunities in the country.

There are plenty of opportunities for Betfair to make money there right now, I'm sure...

From how I read what Peter said and what I have quickly read on the internet when they are bought for cancellation they are taken out of circulation so there is nothing to sell back as they don't exist any more. Hence the remaining shares representing a higher ownership %.

Interesting one - on reflection, I don't know what the situation is... Peter?

Jeff

[Euler]

On a buy back you cancel outstanding float so they effectively get removed from the market and the remaining shareholders get more earnings per share. You can't sell them back but you could issue more shares at some point when you think your shares are overvalued.

Usually a buy back is called as the company has money and can't put it to use, so by buying back shares you effectively return the cash to shareholders in a tax efficient manner. It's more efficient than issuing a dividend. However Betfair have also issued a dividend!

[andyfuller]

Usually a buy back is called as the company has money and can't put it to use, so by buying back shares you effectively return the cash to shareholders in a tax efficient manner. It's more efficient than issuing a dividend. However Betfair have also issued a dividend!

Yup that is what I read as one of the reasons for doing it, much better to pay Capital Gains Tax than income tax but surely this isn't the reasoning for Betfair.

I am struggling to see any other reason than to prop up the falling share price but unless you address the underlying reasons for a falling share price I only see it as a way of buying you time by artificially keeping the price up before it falls again.

I wonder if it is at all possible to find out the different prices at which employees bought into the shares. I read on Scott Ferguson's twitter that he didn't buy into the shares when he worked there because he had missed the early low prices and felt them to be too high when he then had the chance (I will try and check this to make sure I have paraphrased him correctly).

Also weren't the directors, founders etc limited to how many shares they could initially off load? Not sure when they were allowed to sell the rest of the shares they held but read it somewhere so will try to dig it out.

[andyfuller]

Also weren't the directors, founders etc limited to how many shares they could initially off load? Not sure when they were allowed to sell the rest of the shares they held but read it somewhere so will try to dig it out.

Following Admission, a total of 71,286,811 shares held by certain of the Company’s larger shareholders and each of its directors and senior managers, representing in aggregate 66.7 per cent. of the shares in issue at Admission, will be subject to lock-up arrangements. Under the lock-up arrangements and subject to certain exceptions, the group of larger shareholders and each of the Company’s directors and senior managers have agreed not to offer or sell shares for a period of 180 days after Admission (or 365 days in the cases of the directors and senior managers). If the over-allotment option is exercised in full, the number of Shares subject to lock-up arrangements will be 69,536,489 Shares, representing 65.0 per cent. of the shares in issue at Admission. The Company has entered into a similar lock-up arrangement for a period of 180 days.

Source: http://corporate.betfair.com/media/pres ... 10-22.aspx

[andyfuller]

Betfair stumbles after offshore tax threat

By Bryce Elder and Neil Hume

Last updated: July 14, 2011 2:26 pm

Betfair was under pressure in a falling London market on Thursday amid tax fears.
Shares in the FTSE 250-listed betting exchange fell after the government said online gaming companies based offshore would need a domestic licence to take bets from UK customers.

The proposed change “lays the foundation for potential taxation”, said JPMorgan Cazenove analysts. “The clearest current advantage for offshore operators is the avoidance of the 15 per cent gross profits tax applicable to onshore gaming profits and therefore we think that an offshore tax in line with onshore may be in the pipeline,” they said.

Betfair would be exposed to such a tax, having relocated its official headquarters to Gibraltar in March to save about £20m a year. The stock, down 3.4 per cent to 682p, has nearly halved since its flotation in October.

Investec estimated that a 15 per cent tax would cost Betfair two-thirds of its annual profits to April 2013. The financial and structural impact may be even greater if Betfair has to apply a horseracing levy on customers’ winnings, it added.


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[andyfuller]

Change in UK gambling law may hit company tax bills

By Rosalba O'Brien

LONDON, July 14 | Thu Jul 14, 2011 12:20pm EDT

(Reuters) - A proposed change in the way Britain licenses gambling operators which are based abroad, may pave the way for the government to tax offshore gaming firms.

The Department for Culture, Media and Sport unveiled plans on Thursday to regulate remote gambling at the point of consumption, not supply, which they said would help protect UK gamblers.

"The current system for regulating remote gambling doesn't work. Overseas operators get an unfair advantage over UK-based companies, and British consumers who gamble online may have little or no protection depending on where the operator they deal with happens to be based," said the minister responsible for gambling policy, John Penrose.

Analysts say the proposals, which will insist that all gaming operators selling into the UK obtain a licence from the Gambling Commission, may pave the way for changes in taxation that could hit the firms.

"People see this as a precursor to taxation on the remote gaming companies," said Nick Batram of analysts Peel Hunt.

"They're creating a legislative structure that makes it easier for the HMRC (tax department) to introduce a tax."

Many betting firms operate from offshore tax havens, including Betfair , the world's largest betting exchange. It followed Ladbrokes and William Hill by moving part of its business to Gibraltar in March .

The Gibraltar tax rate is 1 percent compared with 15 percent in Britain.

Betfair's shares dropped as much as 4 percent on Thursday, while William Hill fell 3.9 percent and Ladbrokes dipped 1.4 percent.

With any new tax laws likely to be at least two years away, analysts saw the impact as longer term rather than immediate.

James Hollis at Evolution said a 15 percent tax rate would translate to a hit of up to 30 million pounds ($48 million) per year to William Hill and Ladbrokes, "representing a clear medium-term disruption".

However, the change in the tax regime would likely take out smaller, weaker rivals, leading larger operators to gain market share and enabling them to recover much of the lost income, said Hollis. ($1 = 0.624 British Pounds) (Reporting by Rosalba O'Brien; Editing by Elaine Hardcastle)

Source: http://www.reuters.com/article/2011/07/ ... 0T20110714

[andyfuller]

As the above article says this isn't going to have an immediate impact but long term it could be yet another game changer. Enjoy Premium Charge version 3 and the £250,000 Lifetime allowance while it lasts, might not be long until people are looking back thinking what a good deal July 18th 2011 was compared to what they are being offered in July 2013

[gutuami]

by July 2013 bf will be back in UK
at least with the servers of horse markets and soccer
or BetDaq will get bigger and better and we'll not need bf