Betfair IPO gamble pays off as share sale values it at £1.4bn

Betfair's float has been a big hit: the shares, priced at the top of their range, have since gone up...

by James Taylor
Last Updated: 19 Aug 2013
Many thought that it was a bit optimistic for Betfair to launch its first public offering now, given how tough it's been to get new flotations away lately. But they needn't have worried. The shares went on sale today and fairly flew off the metaphorical shelves, being priced towards the top of their range - and they've actually gone up since, suggesting there's no shortage of appetite in the market. A valuation of £1.4bn still sounds high to us, but there's no doubt that Betfair has decent credentials. And after a gloomy week, it's nice to see that investors are still willing to put their hands in their pockets for good companies with solid prospects...

All told, Betfair has sold off about 16m shares, equivalent to 15% of its stock (allowing current investors to cash out to the tune of over £200m). They were eventually priced at £13, at the upper end of the proposed £11-£14 range, and at time of writing, they've jumped a further 18% to £15.33 (having gone as high as £15.65). So it's safe to say that investors like the stock - even if that £1.4bn valuation (or £1.6bn as it is now) feels a teensy bit rich for a company that only had sales of £340m last financial year, and whose US prospects remain distinctly uncertain.

On the other hand, having gone pretty much from strength to strength during its ten-year history, there's every reason for investors to trust in the management and the software behind the site that has revolutionised online gambling. And since this valuation will presumably propel it into the FTSE 250, it should gain some extra kudos and profile as it looks to break into more of those all-important overseas markets. It's also a profitable, cash-rich and largely debt-free business, so it's expanding from a strong position. You can see why investors think it's worth a punt.

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