Softbank, a Japanese bank, is facing major losses on its 23 per cent stake in Betfair, the online betting exchange which is hoping to float in the autumn.
The British business, one of the UK’s few successes during the dotcom era, has hired Goldman Sachs and Morgan Stanley to advise on the listing, which could value the company at £1.5bn. However, that price tag is understood to be at the top of most industry watchers’ expectations. Softbank bought its near one-quarter stake in Betfair for £355m in 2006, valuing the business at £1.54bn. When asked if the company would be valued at £1.5bn, a senior Betfair source replied: “I wish.”
A banker close to the listing plans added: “Selling for less than you bought it for never makes anybody look good. Softbank does not necessarily have to sell [during a flotation] as long as there are enough shares on offer to make it interesting. But nobody knows how much Betfair will be worth. It depends on market conditions and they are volatile at the moment.”
The uncertainty surrounding new flotations has been starkly illustrated twice this month. Fairfield Energy pulled its £330m listing on the London Stock Exchange last week after failing to drum up enough interest from investors. Fairfield admits that it is unlikely to try again until 2011.
Loss-making online grocer Ocado is facing a nervous weekend as investors decide whether to back its controversial flotation, as the company faces a barrage of criticism from City analysts who are sceptical that it can ever become profitable.
Betfair first considered floating in 2005. Sources close to the group said that it has been growing strongly lately and is investing overseas. Betfair declined to comment and Softbank did not return calls.