Betfair makes market debut as punters say flotation is a winner

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The Independent Online

Betfair stormed on to the Stock Exchange yesterday, finishing the first day of conditional dealings up, with the shares ahead by 250p at £15.50. The stock made its debut at £13.00.

The betting exchange's advisers had originally set a range of £11 to £14 for the shares, after 15 per cent were put up for sale by founders Ed Wray and Andrew Black and other investors.

While analysts have voiced concerns about whether the exchange can continue its rapid growth and over the price at which the shares are being offered – more than 23 times earnings – demand among investors proved unusually strong. Spread betting firms were last week forced to increase their "grey market" prices on the shares amid a flood of "buy" trades.

Despite the doubts expressed, market watchers have noted that Betfair is free of several of the factors that have hampered previous flotations resulting in their cancellation.

The exchange can still point to growth prospects, particularly in international markets as they de-regulate and is also debt-free. As such, it is starkly different from the debt-laden private equity-owned firms which have tried and failed to secure support for floats in recent months.

David Buik, a partner at BGC Partners, said the success of the flotation had "all the hallmarks of the tmt days"; of the late 1990s, when technology and media companies were able to float with share prices at vast multiples of their earnings (when they actually had earnings).

However, he said he did not believe that Betfair would prove to be a bust, like so many of the dot.com issues proved to be. "The bookmaking industry has been rejuvenated as a result of this initiative 10 years ago," he said. "Many bookmakers hedge their positions on Betfair."

Betfair's exchange models means it is not actually a bookie. Rather, the exchange allows punters to post their own prices, matching them with punters on the other side of a bet. As such, for the first time it enabled anyone to "lay" horses to lose which, prior to the launch of the exchange, was just the domain of licensed bookmakers.

David Yu, Betfair's chief executive, said as the shares made their debut: "Betfair and its management team are delighted that the Company has successfully completed its IPO and has now become a listed company.

"We believe we have many opportunities to grow our leading position in the online sports betting and gaming market and we are extremely pleased that new investors share our enthusiasm for the future of the business. We are grateful for the support of all our shareholders, old and new, and will work hard to generate further value for all our stakeholders."

The price means Betfair is valued in excess of £1.6bn and will hold a place in the FTSE 250 index of second tier stocks. Dealings in the shares will go go unconditional next week.

Hopes rise for London floats

Betfair has further raised hopes that the Britain's moribund IPO market will spring into life. The London Stock Exchange yesterday described its pipeline of pending flotations as "robust" after a difficult few months in which high-profile names such Merlin Entertaiment and New Look cancelled proposed market debuts due to lack of investor support. The exchange said there was still "particularly strong" interest from foreign companies seeking to list shares in London. Over the last month or so, three Indian companies have joined the junior Alternative Investment Market and a spokesman said there was continuing demand from investment-hungry Russian and Chinese companies.

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