Wednesday, 22 September 2010

Listing

To the surprise of no one, Betfair have announced their intention to list on the London Stock Exchange and to proceed with an IPO of shares.

A couple of highlights from their official press release:

Betfair benefits from having a first mover advantage in sports betting exchanges: as the Betfair customer base and community grows, liquidity in Betfair’s markets increases, offering more choice and improved prices, which in turn attracts more customers, leading to higher levels of liquidity and improved prices.
I'm not sure how higher levels of liquidity in already liquid markets can lead to improved prices.
Betfair has a loyal and stable active customer base which generates both growing revenues and significant cash flow. As at 30 April 2010, Betfair had generated £355 million of operating cash flow since its launch in 2000, had approximately £151 million of net cash reserves and no debt. In addition, as at 30 April 2010, Betfair held £284 million of customer deposits.
Perhaps not as loyal and stable as they were three years ago. The Premium Charge upset a lot of people, and a viable alternative offering lower commission would seen see a stampede.
Geographic expansion—In addition to growth in new customer segments, Betfair will continue to pursue growth internationally, where its market penetration is currently lower than in the United Kingdom. This growth will be pursued in line with Betfair’s measured and prudent approach to regulatory compliance and based on a commercial assessment of the cost and resource implications of entering new markets. While Europe and Australia provide potential for growth in the foreseeable future, in the longer term there may be development opportunities in some of the largest gaming markets in the world which are currently highly restricted, such as the United States, India and China.
The mood may be changing in the USA, and the cricket scandals may help to loosen restrictions in India.

2 comments:

Jason Trost said...

Smarkets is growing to become a viable alternative to Betfair. Apart from our current 1% commission offer, we're looking at ways to further disrupt the business model. Premium Charge is an abuse of Betfair's market position.

Scott Ferguson said...

Prices can still improve on less liquid markets, there are plenty of those around.

No rival exchange has made a profit or a dent yet, zero reason to believe another one will do anything but join the long list of carcasses left behind. The barrier to entry - marketing and tech costs - is beyond any start-up.