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Betfair Goes Public
25/10/10

Betfair, the world’s first racing tips betting exchange and the unquestionably dominant force in international exchange betting, has become a public company with the release of shares in the business on Friday 22 October being the Initial Public Offering (IPO) of stock in the business, writes Elliot Slater.

The IPO values the business established by Andrew Black and Edward Gray back in 2000, at a staggering £1.39 billion, with individual shares being released into the market at a price of £13. Black and Gray will jointly retain a 21 per cent share of the company, roughly equating to a joint fortune of over £560 million.

Only 15 per cent of the total stock in the company however will be released, as the bulk of the shares, (amounting to over 66%), remain in the hands of existing directors and managers, who are not allowed under stock market trading laws to release their shares for sale for between 180 and 365 days.

The Betfair success story has revolutionised the betting industry but remains in some quarters a highly controversial product. The concept behind the product is to allow a horse racing Ireland bettor to back a horse to win or lay a horse to lose, and it is the latter option which has been the source of much criticism, with those against the product suggesting that it incentivizes trainers, owners and jockeys not to run a horse on its merits.

Traditional betting firms have also been up in arms against the exchange from the outset as Betfair are not obliged to contribute to the levy as they are not technically a bookmaker. Betfair match a backer to a layer and take a commission from the winning side, therefore having no financial risk to themselves, the very definition of what it is to be a bookmaker.

Industry watchers will be keeping a very close eye on early trading of Betfair shares with most analysts believing the initial share offering will be snapped up very quickly.