James Moore: You can bet Betfair’s investors are not happy


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The Independent Online

Outlook Talk about getting egg all over your face. A couple of weeks ago it emerged – via the small print in Betfair’s annual report – that the betting company paid dividends in 2011, 2012 and 2013 and bought back shares in the 2011/2012 financial year that it shouldn’t have. And now corporate governance watchdog Pirc wants investors to vote down the company’s annual report.

The background to this can be found on note 26 on page 144 – but, of course, you knew that – which explains that the company lacked the distributable reserves to make payments during the dates in question. Cure major scandal? Calm down. This a cock-up, not a crisis.

What happened was this: The money to pay the dividends should have been held in Betfair’s holding company as “distributable reserves”. Instead, it had been parked in a subsidiary, putting the betting exchange operator in violation of accounting guidelines. It was only recently that the company woke up to the fact, having called in KPMG to run the slide rule over what it was doing. Hence the note to the accounts.

A mere piffling technical violation, says Betfair, before rather arrogantly claiming that Pirc hasn’t found any traction with its shareholders.

But it’s still a black mark that Betfair, a company which handles vast quantities of punters’ money every day, should have made such an error. And allowed it to go uncorrected for such a long time. Even if it was “only technical”. Perhaps the best bet for investors might be to send it a message by abstaining?