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Betfair’s "maiden" results were disappointing, apparently, so much so, that their share price was down 14% following publication earlier today.
Interestingly, they pointed a finger in the direction of the owners of successful Flat horses:
"Finance director Stephen Morana said: “The flat season is suffering as it loses more and more good horses to stud as soon as they’ve won as three-year-olds."Well, the game is all about breeding, so no surprise there then, is there, Betfair?
Betfair would like to make money on horse racing & the owners want to, well, just make money — they’ve already done the ‘racing’ bit.
It’s a shame we don’t see much of the successful horses on the Flat any more.
Finance director Stephen Morana said: “The flat season is suffering as it loses more and more good horses to stud as soon as they’ve won as three-year-olds."
That seems a bizarre comment.
Here’s an extract from an FT blog on Betfair’s initial set of results –
Betfair hasn’t been the thoroughbred IPO success many people expected.
In fact the internet betting exchange already looks like something of an old nag:
And Tuesday’s maiden (half-year) results spell out exactly why.
What was marketed as a high growth company by IPO sponsors Goldman Sachs and Morgan Stanley is shown to be anything but in these figures, as analysts are forced to lower forecasts less than two months after flotation.
Full transcript here – http://ftalphaville.ft.com/blog/2010/12/14/435966/betfair-falls-at-the-first-results-hurdle/
When you consider that the top twelve money earners on the flat in Britain this year include seven aged four or over, the comment looks about as well founded in fact as the Betfair prospectus.
For the record, that’s Twice Over, Harbinger, Starspangledbanner, Rip Van Winkle, Equiano, Byword and Midday.
AP
The real truth is that Betfair horseracing have run thin on mug layers. It was bound to happen in time, given the inside nature of the markets they operate. They require a constant feed of 95% losers betting in ever increasing amounts to provide market growth, which has well and truly peaked at this stage.
A "stimulus package" in the form of significant commission reductions would help but their racing markets look very limited growth wise in the UK/IRE, imo.
The real truth is that Betfair horseracing have run thin on mug layers. It was bound to happen in time, given the inside nature of the markets they operate. They require a constant feed of 95% losers betting in ever increasing amounts to provide market growth, which has well and truly peaked at this stage.
.http://www.thisislondon.co.uk/standard- … ttering.do
"Betfair announced an underlying 50% rise in post-tax profits at £14.4 million, but once the £15.7 million costs of flotation and
a £6.4 million profit from an experiment with high-rolling punters
are excluded the reported profit dropped 13% to £6.8 million. Revenues were 12% higher at £188 million."
Any link Cav?
If Goldman Sachs are doing "God’s work" then how come everything they touch keeps making their clients poorer and them richer?
This share price fall raises another question about the judgement of Paul Roy, who was a keen buyer soon after the launch.
AP
This share price fall raises another question about the judgement of Paul Roy, who was a keen buyer soon after the launch.
AP
Not least as a stock-picker – down 24% on IPO…I mean, blindly backing favs in novices’ chases puts you several million ahead of him!
Mike
Silvoir
The Betfair high rollers cropped up on a live Q&A Betfair did a few months back. I cant find a link, if I do I’ll post it. Basically as I recall a question was posted in relation to their IPO prospectus which mentioned Betfair standing (and profiting) from certain clients themselves through their Malta operation instead of passing them through the main exchange and onto the main body of Betfair customers. "Cherry picking" their customers if you like, at the expense of skilled players on the main exchange.
Betfair responded by claiming a number of high rolling clients had contacted them looking for a service that provided them with bets of any size, at any time, at any agreed price. This of course would not normally be possible on the main exchange for liquidity reasons so Betfair had decided to provide a service where they assumed the risk through Malta and hedged that risk back through the main exchange. The service was trialled for a few months and discontinued due to revenue while being profitable was also "volatile" (I think that was the word they used).
You can only assume the "high rollers" were losers, otherwise Betfair probably wouldn’t have gone near them in the first place. The word "volatile" suggests that while profitable for Betfair they took a few sizeable hits along the way and decided being the ticket clicker was a less stressful way of life. It would be a plausible explanation as to why liquidity dropped on the main exchange from the start of 2010 onwards.
Once again, I’ll post a link if I find it.
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