Another Stockmarket Flotation For Betfair

Many Newspapers are reporting that the Internet Gambling business Betfair is once again considering a stockmarket flotation although a company spokesperson declared “It’s just speculation at the moment” which added to the comments by David Yu the CEO earlier this month when he said Betfair has “no plans at the moment” for an offering. Despite these comments, speculation is high that Credit Suisse have been called in to advise on what could be a £1.5 billion flotation. There are a number of reasons why Betfair might consider such a move, the main one of which is the expectation that President Obama will lift at least some of the restrictions on online gambling next year. A couple of weeks ago Betfair reported revenues up 27% to £303 million and earnings up 29% to £72 million and has repeatedly reported good results since its launch 11 years ago, however if the US administration does act there is expected to be increased activity in mergers, acquisitions and consolidation in the market and Betfair needs to be prepared and have the resources available. Corporate advisors have had a lean time recently as flotations have all but dried up but activity is expected to increase towards the end of the year.
The secret to the success of Betfair lies in the fact that it is not a traditional bookmaker but a betting exchange. This means that it does not accept bets itself but rather joins punters together who bet against each other and Betfair takes a commission from winning bets. This enables better odds to be established by the gamblers as they are not subject to the same tax regime as bookmakers.It now holds a substantial share of the gaming market in the UK and some claim it is even changing the face of the market.
The company is still 25% owned by the two founders; Ed Wray and Andrew Black with Japanese bank Softbank holding a similar stake. Softbank bought into the company in 2006 for £355 million which valued the company at £1.5 billion and it is believed that the bank is interested in getting something back which a flotation would do. The company has already had one pulled flotation a few years ago and does not wish to have a repeat but the recent rally in global markets could point the way to an IPO.