Betfair to flutter on the stock market

The gambling site is set to launch an IPO. Odds-on that it's not going to be easy...

by Emma Haslett
Last Updated: 20 Dec 2010
The owners of the world’s largest gambling site, Betfair, may be more used to letting others take a punt, but it seems the company is gearing up for a flutter of its own. It has today revealed plans for a £1.5bn listing on the stock market, ostensibly to help it expand into international markets. Half of Betfair’s major shareholders, which include founders Ed Wray and Andrew ‘Bertie’ Black, as well as Japanese bank Softbank, are expected to sell shares that make up about 10% of the company’s total share capital.

Betfair has been courting the idea of an IPO for some time now – in fact, it was making noises about listing back in 2005. And while Ocado’s disastrous IPO a couple of months ago proved that on the face of it, the markets aren’t in the healthiest of states at the moment, this may actually prove to be an ideal time for Betfair to list.

To start with, the company’s latest financials show that if there was ever a time to take a risk, now is it. In the year ending April 30, revenue was £340.9m, 13% up on the previous year. Pre-tax profit fell 63% to £17.8m – but the company pointed to a temporary increase in marketing spend ahead of the World Cup, as well as a new project to overhaul its hugely sophisticated IT platform. One of the most telling figures, though, was the £150.9m in cash it has managed to save, with no debt – after the recession, spare cash is a luxury that few businesses have.

The company says it isn’t planning to use the IPO to raise any new money – instead, the listing will help to create a ‘heightened profile and enhanced transparency that will help us cement our long-term relationships with customers, regulators and business partners around the world’. In other words, overseas gambling regulators tend to be far more welcoming if a company is listed – particularly if its business is something as contentious as online gambling. It’s probably worth mentioning, as well, that investors are unlikely to be against realising some of the gains the company has made over the last 10 years

The other point is that if Betfair is planning to expand overseas, launching the IPO now will give it the capacity to raise funds if and when it needs it, particularly if acquisitions are in the offing. The company is clearly thinking ahead: preparing in advance for the day when it will need money, rather than waiting until its need is pressing. Unlike Ocado, whose troubled flotation over the summer had to raise £400m.

Betfair is also a very clever business which avoids the traditional bookie’s blight of making the odds itself: so long as punters keep betting, the money keeps flowing in. Despite all this, let’s not forget that the markets have yet to fully recover from the recession. Wonder what the odds are of things going smoothly?

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