Now here’s an online-based IPO that sane investors could actually consider backing.
From RNS on Tuesday morning:
Betfair today announces its intention to apply for admission to the premium listing segment of the Official List of the UKLA and to trading on the main market of the London Stock Exchange (“Admission”) and to proceed with an initial public offering of Shares (“the Offer”). Betfair does not intend to issue any new Shares as part of the Offer.
Betfair has a track record of sustained revenue growth and profitability and has multiple opportunities to secure future growth based on its unique, disruptive exchange platform technology and leadership in a large and growing online sports betting market.
All of which makes it very different to Ocado — although note Goldman Sachs is one of the joint sponsors.
Although there’s no detail on pricing this morning, traders reckon Betfair – essentially a stock exchange for betting – is looking for a valuation of £1.2 – £1.5bn. To put that figure in some sort of perspective, in the year ending April 30, 2010 Betfair generated EBITDA of £53m on sales of £340.9m. At that time the company had a cash position of £150.9m and no debt.
So £1.5bn would be a pretty punchy valuation, especially in view of the fact that top line growth slowed to 13 per cent in the last financial year and there has been pressure on margins, plus increased investment in the run up to the IPO announcement.
Still, Betfair has a great business model which has transformed its industry, three million customers — and plenty of opportunities to expand internationally.
Indeed, one of the reasons for flotation is precisely to achieve those opportunities. The others are to provide the flexibility to react to a developing and consolidating online betting and gaming industry and to incentivise and retain key management and employees.
No new shares are being offered in the IPO (and there’s no private equity backer looking to bail out). Instead, a minimum of 10 per cent of Betfair’s share capital is being put for sale, in around a month’s time, by the company’s major shareholders. This includes founders Edward Wray and Andrew Black, who are to sell approximately 10 per cent of their holdings.
All in all, this looks like one UK IPO that will get away smoothly, although the valuation will probably have to be nearer £1.2bn than £1.5bn.
Although potential investors might want to look into a deal that Betfair has recently struck with Goldman. The US investment bank has taken a 12.5 per cent stake in LMAX platform — Betfair’s online exchange for retail financial trading, which is due to launch in the fourth quarter.
Do Goldman ever miss a trick?
Related link:
Betfair confirms plans for London listing – FT