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Boycott needed

As you will doubtless know, CVC’s bid for Betfair was announced at £8.80 this morning.

It seems to me, with the very obvious caveat that I know nothing about the process behind this stuff, that it is a curious level at which to have bid.

The price was £6.90 a week ago last Friday, so you’d be right to argue that it’s a long way up from there.

But if you’ve got to get the long-term shareholders to sell, and they’ve held on all this time (from the £8.70 that it was at the end of the lock-up, through the horrid period where it seemed to be heading for zero, back up to £9  year ago) – they’re surely aren’t going to go for a number that doesn’t even offer them a 13-month high, are they?

They could have sold above that price at any time over a 2-month period from 1st Feb 2012. If they had lost faith in the company after its price had plunged from a high of £16 down to a low of £5.71, wouldn’t they have done it then? Why would they want to be getting out at that level now that 650-heads-worth of costs have been taken out?

There would have been a frisson of excitement among some shareholders if they’d pitched it in the corridor of uncertainty this morning. But £8.80 is a leg-side long-hop: too easy for the Board to dispatch. If they don’t hit it out of the park, serious questions should be asked.

My guess is that the bidders will be back after the publication of Betfair’s defence on 7th May with a higher offer.

They’ll have warmed up by then, and I’d bet that the second time, it’ll be a perfect length ball, just around off stump – perhaps with a bit of out-swing.

Much trickier to know how to play.




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3 Responses

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  1. HJPMILES says

    Hello, fascinated by your posts on Betfair and by CVC’s bid. I founded a much smaller exchange called Liv-ex, which is a marketplace for professional traders of fine wine, at about the same time as BF. I couldn’t agree more with your sentiments.

    Personally I think BF is absurdly cheap and have been buying for a while, but it needs a dramatic change of strategy much of which you have highlighted. a) Costs are ridiculously/ crazily high. b) get back to the core – get rid of all the elements where BF is not a leader and concentrate on the exchange – create liquiditry and efficient pricing for the industry (for pros/ high rollers and forget about casual punters!) c) rid itself of absurd notions of becoming mass market – casual punters do not have the time or inclination to make markets (they have day jobs) and are irrelevant to BF’s bottom line anyway. Leave them to the Paddy Powers etc etc. Allow other businesses to sell BF’s efficient pricing to consumers. It is a mugs game anyway with very high acquisition costs. d) pay all the cash out to shareholders and commit to a high pay out going forward. This business has no major requirement for cash, like all exchanges, it generates it by the dam full.

    This business has lots of capacity to grow for years to come and will be great again! I suspect Mr Koch knows this better than anybody!

  2. bigdipper says

    HJPMiles, the professional punters are often the people who dribble in £2 and smaller bets. You can’t profit from overbroke books any more (other than taking on risk w/ e.g. the SP) but lots of people will have winning strategies market-making, full-booking, scalping (getting matched on either side of the current price) and small-tick trading that depend on bet-volume and price-direction data provided by BF. These and other trading strategies tend to be algorithmic (e.g. weight-of-money, overbought/oversold or inflection point strategies) and automated.

    The casual punters taking a price are the fish these professional players need. The reason that there hasn’t been an exodus to Betdaq despite the pricing being so much better there for winners is that the fish–the small recreational punters–are still on BF if they’re anywhere.

    How is BF going to charge other bookmakers for efficient prices? Anyone with a two-bob account will be able to log in and view current prices. The thinking behind FO has been to profit from customers’ price-finding without letting losing customers bet with winners.

  3. bigdipper says

    Maybe the offer is well-pitched? It’s a tad over the price after the lock-up period?

    If long-term shareholders have gone sour on BF, they will now feel they can get out at the level first offered to them, and can look forward to a bit more to come….

    Thank you to Mark Davies for a straight answer on abolishing Betfair PC.

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