Betfair set float price

[Euler]

Jul 11, 2011 (London Evening Standard - McClatchy-Tribune Information Services via COMTEX) --

Will Betfair find the going any better this week? Unikely.

So far, July has not treated the betting exchange kindly.

But then, neither did June or May.

This morning shares fell 4 percent after closing down nearly 6 percent on Friday, taking them to just 654.5p.

When Goldman Sachs and Morgan Stanley floated it last October, they persuaded investors it was worth... ahem, 1300p. Well done, lads: big fee well earned.

So what's going on? As anyone who's considered taking a flutter on online gambling stocks will tell you, there's a massive risk involved in their operations overseas, where many countries still take a dim view of online gambling.

Fines and trading bans have a nasty habit of appearing out of the blue from governments launching electioneering clampdowns. What's more, there are fewer gamblers these days and Britons don't have the money to spend dabbling around on the horses.

But investors are also getting wise to more of a Betfair-specific problem. There's a growing suspicion among analysts that the company is being a tad too aggressive with its accounting practices.

Betfair is having to invest in developing its IT to run faster, better services. The question is, does this spending always show through clearly in its profit figures? Betfair put up to UKpound25 million of its IT development costs last year on its balance sheet instead of taking it out of its profit figures as a more conservative company might.

A nice chap from Betfair explains this simply gives a better picture of the underlying way the business is performing during a three-year heavy investment period, smoothing out the costs.

But some investors are still unnerved and troubled about the implications for Betfair's value.

You see, if you put that UKpound25{million through the profit and loss account underlying profits come out about 30 percent lower. To make things more scary, that UKpound25{million expensed cost is about UKpound10 million up on the previous year -- one hell of an acceleration in the wrong direction.

As one investor told me this morning, if you see Betfair as, say, an IG{Index for wannabe turf accountants, you can understand the concern. IG's shares today value it at 12.5 times its expected profits for 2012. Betfair is valued at 18.5 times. Sounding toppy? That's nothing. Put Betfair's IT development cost through the P&L and the share price is a thumping multiple of 24 times. That seems like the kind of mispriced bet that would see you getting crucified by Betfair's famously sharp customers.

Chief executive David Yu recently announced he was off. Shareholders should follow.

[Iron]

Put Betfair's IT development cost through the P&L and the share price is a thumping multiple of 24 times.

In that case, they aren't getting very good value for their money from their IT guys, if Saturday's crash is anything to go by...

Jeff

[Euler]

That comment made me look at their recent results. They are captialising a lot of IT costs on the balance sheet. £50-60m last year. I need a copy of the full report though to see what policy they have on this.

[jimrobo]

capitalising fixed assets is normal business practise. The depreciation policy will be in the notes in the accounts

[Euler]

I'm aware of that, just not sure how quickly they are depreciating it. I can't imagine technology can be depreciated over long periods, so interested in seeing the term.

[jimrobo]

It will be set out in the accounts. Whatever the standard depreciation policy is I imagine. Any exceptional items will be in there too

[andyfuller]

Decent rises the last few days for BF.

Ian Chuter (Group Operations Manager) just bought £50,000 worth.

[Iron]

If you go to http://www.amazon.co.uk/Star-Principle- ... 925&sr=8-4 and click on 'Look inside', the author writes in the introduction about the history of Betfair, and how he made over £100,000,000 from it!

Jeff

[andyfuller]

Betfair bosses bank huge increases in pay despite disastrous flotation

Soon-to-be-former chief executive David Yu gets 125% rise in total package, while finance director Stephen Morana enjoys 445% boost

David Yu, the soon-to-be-former chief executive of Betfair, and Stephen Morana, the betting exchange's finance director, banked increases in pay last year despite presiding over one of the most disastrous flotations in City memory.

The total package for Yu, who told the board last month that he would be stepping down, rose by 125% last year to £824,676, according to Betfair's first annual report as a public company. That rise was trumped by Morana, however, who got a 445% increase to earn £1.6m in the year to April. Since the company floated in October, its shares have slumped by 50% from £13 to close on Tuesday night at 653.5p.

The sums awarded to Yu and Morana were inflated by the so-called "senior executives' incentive plan" (SEIP), which saw Yu receive an extra £300,000 and Morana £1.2m.

The report stated: "The 2010 SEIP granted certain senior employees and executive directors one-off conditional awards consisting of a cash amount and an award of nil-cost options on admission to the stock exchange. Under the terms of the SEIP, 50% of the options will vest and become exercisable on the first anniversary of admission and the remainder will become exercisable on the second anniversary of admission, subject to continued employment ... The company does not intend to make any further awards under the SEIP."

Betfair, which was founded in 2000 by current chairman Ed Wray and Andrew Black, became one of the UK's biggest dotcom success stories. However, despite an encouraging start to life as a public company, it has struggled to convince doubters that it is really worth anywhere near its initial £1.4bn valuation.

The annual report also reveals that Yu and Morana "were conditionally awarded 130,000 and 100,000 fair market value options respectively, as well as 15,000 nil-cost options each. These options will normally vest on the third anniversary of grant and are subject to two corporate financial performance conditions."

Story: http://www.guardian.co.uk/business/2011 ... um=twitter

[andyfuller]

Share price taken a bit of a hammering yesterday and today - broke sub 600p a little while ago for a moment

[Euler]

It's one of the worst floats in recent memory, post the dot com boom.

[superfrank]

New intra-day low of 599 this morning http://www.google.com/finance?q=betfair.

I'll start to get interested at 199!...

[pt9091]

After watching inside trader, I am not surprised that Goldman Sachs was behind the betfair float!

[superfrank]

Even the 'Vampire Squid' isn't doing too well despite all its blood sucking tentacles.

http://www.google.com/finance?q=goldman+sachs

[andyfuller]

Closed the day on 600.50 and hit a low of 598.00 at one stage just before the close, a loss of 4.98% on the day.

Bwin were down 6.53% on the day as well, was there some news out?