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Softbank sell out




Or, looked at another way, 08:30, Betfair share price, £8.80; 08:32, Betfair share price, £8.34. Yikes. What to make of that?

I heard soon after from a source very close to it that actually Goldman traders had taken the whole lot at £8.09.6, but subsequent conversations, and the price movement of the shares, suggest that that was wide of the mark. Perhaps it was a backstop bid; or maybe different houses were put in competition. Either way, judging from the £8.29 market low on the day, and the £8.41 on the close (down 4.38%), subsequent reports of £8.20-25 are ones I’m more likely to believe. [Since I wrote this, someone has confirmed to me that it was indeed £8.09 off-market for the block, flipped into the market at £8.29.]

Wherever their block trade took place, though, Softbank are out; and the question I have been asked a few times today is what does it mean now for Betfair’s share price, or for the company as a whole?

Take my view with the caveat that I have no official information of any sort, and add the warning that any cynic will give you that I am a reasonable-size shareholder in the business, and therefore can’t possibly have an independent view of the world. And then if you’re still interested, read on…

The gloom-mongers among you who love to tell me how far away the float price now looks are guaranteed to take the view that as Softbank have been in for ages, and must have timed their sale thinking that they’ve picked the top. Ignoring my obvious mischievous counter that their having initially bought at a 10-year high should be reason in itself to pile in on the day they sell (on the basis that if they’re true to form, it’s a likely low),  a more valid response would be this: in my experience, they won’t have made this decision after sitting down with management and deciding after a lengthy conversation that they don’t like where the company’s at or what their numbers look like. I was thinking to myself only this morning that there are plenty of reasons to be positive, as analyst upon analyst has detailed of late, and in my view, Softbank selling out because they’ve decided they want the cash for something else doesn’t change that.

So, I am a buyer on the weakness. Indeed, today I literally was: having sold a small number of shares ahead of CVC at £9.20, I decided today to get back in.

Here are my three reasons why:

  1. The shares have never been very liquid, which has put a number of people off them. The reason for the illiquidity is that too much of the stock was held in blocks. One of those blocks got released today.
  2. Softbank have long been known to have slightly itchy feet about the company. (Wouldn’t you, if you’d bought at £13.20 in April 2006?) The fact that they were considered a likely seller made it easy for people to short the stock, confident that a big seller would appear on any signs of strength. That cannot have done anything but weigh on the shareprice; but as of today, it no longer applies.
  3. Betfair’s had a miserable few years, but they’ve done a lot in the last 12 months to change the position of the company dramatically. Not all of it will please everyone who loves The Company That Was, but looked at from a purely financial perspective, I felt before the fall this morning that the shares were on the recovery trail. Softbank selling out doesn’t change the fundamental numbers.

Take it with a pinch of salt, as I say. But that’s my position fully declared, in every respect.



Posted in Betfair.

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5 Responses

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  1. Annunzio says

    Mark the move to a sportsbook may well bring some short term profits to the company but the actions of the premium charge (the latest incarnation by far the most significant) and now the decision to leave the exchange hidden away, has signalled the slow death of the exchange long term. I dont believe you have to be someone who was simply in love with the exchange to see this, just a regular user. The liquidity has taken a dramatic turn for the worse this year and the dismay and anger towards Betfair is evident for all to see on their forum.

    Clearly Koch saw this and desperately wanted to take it back in a long term and ambitious direction. The sell out to become a public company, as so often is the case, has only brought about short termism and has badly damaged the Betfair brand, that you built. Its easier and quicker to destroy an image than to build it.

    Perhaps you will be right and you will make some profit on these shares, the sportsbook may well be a relative success and you can join the large pool of bookmakers, good luck to you if you manage this. But those of us who have been full time or regular customers of Betfair know the writing is on the wall. Without liquidity, the exchange is nothing and unless the premium charge is reversed I’m afraid its doomed to only head in one direction.

    The takeover was the last chance for exchange.

  2. MD says


    I think I’ve covered, or at least strongly hinted at, my views on this in a number of other posts, most recently but certainly not limited to ‘Fantasy Betfair’.

    My comments above relate not to what the company might have been, nor what that might mean for its share price, because I probably got to boring on that some time ago. They are more to do with the current facts as I see them, which are: (a) there’s £160m on the balance sheet which is not IMO adding a single penny to the shareprice, which means either that it’s coming back to shareholders or it’s going to be used for some significant acquisition (which they would need to make a serious mess of not to add value ); (b) the regulatory situation was never IMO as bad as was painted and in any case has got a lot better (i.e. a lot of what was said which was never going to come to pass has indeed now not come to pass, a bit like the Eurozone crisis only not, in this case, likely to return); (c) the costs that had grown in the company have been cut; (d) the acquisition numbers are strong; (e) all the people I speak to or hear about who see management have come away very positive about the business.

    All of that means it is IMO better placed than it has been at any time since it became a public company. I don’t consider that is necessary an incompatible view with yours posted above.

  3. Peter Webb says

    I do think it’s strange that the current management has thrown so much weight behind the sportsbook, it’s really hard for a new users to even know the exchange exists or that the marketing of better pricing actually relates to the exchange mechanism.

    Betfair built such a strong brand on not being a bookmaker the current strategy feels really odd and akin to Coke abandoning the soft drinks market to focus on sausage rolls.

    I know the strategy from a management perspective is to try and get the best out of both, but that’s doesn’t appear to be happening at the front end. It would be have been a little more expensive but much safer to have a sportsbook and an exchange brand IMHO. Merging the two appears to be damaging the brand and the exchange mechanism at the moment, so it will be interesting to see how things play out from here.

Continuing the Discussion

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