Saturday, 24 September 2011

Decline And Fall

This article from This Is reveals that the number of active customers on Betfair is down 19 per cent to 381,000. It's not clear [to me anyway] when this decline is measured from, or what the definition of 'active customers' is, or over what period that 381,000 is measured over (I suspect a quarter), but if it is prior to the introduction of the PC3 [latest Premium Charge], then there is surely worse news to come.

The news that Betfair founder and chairman Edward Wray could be the next senior manager to leave the embattled online gambling firm, will be met with raised eyebrows among investors.

The FTSE 250 business, which allows gamblers to bet against each other rather than against a traditional bookmaker, is already looking for a new chief executive after David Yu said in June he would move on when a successor is found.

But at yesterday’s annual meeting Wray, a former JP Morgan trader who co-founded the business ten years ago, said the firm had ‘started the search for a deputy chairman. The intention is for this person to take over from me as chairman at an appropriate time in the future’. This follows a spate of other senior executives who have also left the business in recent months.

And while all this has gone on investors have seen Betfair’s stock almost halve since it floated last October at £13, with a value of £1.3billion. Betfair yesterday closed down 60p at 723p, valuing it at £839million. The business has faced a number of disappointments and delays as it has tried to push its services into a host of European countries, such as Germany, Denmark, Italy and Spain.

And in August the UK government revealed online gaming companies based offshore would need a domestic licence to take bets from British customers. Betfair moved its headquarters to Gibraltar in March to save around £20million a year.

These constraints on growth are beginning to affect the business, at the start of this month the firm turned in first-quarter core sales down 7pc to £80.8million, with the number of active customers down 19 per cent to 381,000.

For Betfair the wider economic climate is tough, and the regulatory issues it faces are protracted. Investors will want to see a settled management quickly in place, who can then set about getting the share price moving in the right direction again.
It doesn't help that the site continues to have problems. As Peter Webb writes:
Of course you also have Betdaq that you can trade on. The liquidity on Betdaq is higher than ever at the moment and strategies that I use on one exchange tend to transplant well to the other. So whether you use Betdaq to hedge or trade outright its more viable than ever nowadays.

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