Betfair FTSE flotation

Betfair, the world’s largest online sports betting company, announced on September 21 that it had plans for a £1.5 billion listing on the London stock market. The move is part of Betfair’s plans to increase its worldwide presence, with Europe and Australia as its key growth markets, as well as expanding to the United States, India, and China.

Betfair’s owners have been considering a stock market listing for a while but were wary due to the current uncertain market conditions that could deter potential investors. The online grocery company Ocado’s share price plunged following its recent stock market debut, even though the share price was slashed for the initial public offering.

The company began its operations 10 years ago and was created by Andrew Black, a former professional gambler, and former JP Morgan trader Ed Wray. Black and Wray together own a quarter of the company, and it is believed that the next largest shareholder is Japanese bank Softbank. Softbank acquired 23% of Betfair in 2006 for £355 million.

Betfair’s success is due in large part to its revolutionary approach to the gambling industry in which it operates; remove the middlemen from its operations and pass on the cost savings to its customers. The company’s unique operational structure enables its customers to match off their bets with other gamblers. This method renders bookmakers’ positions redundant because matching bets allows the participants to either back or lay an outcome depending on their predictions.

As a result of this unique approach to online gambling, Betfair is able to offer its customers nearly 20% better odds compared with those that would be found with a high street bookie. Even the 5% commission the company charges each winning bet is unable to deter its customers from placing around 5 million bets a day.

Betfair also offers its customers in-running betting, which enables them to buy or sell their bets throughout a race or game and hedge their positions depending on the event’s progression.

Many of the large bookmakers claim that it is becoming much easier for corruption to creep into sports gambling due to these betting exchange systems that are becoming more and more popular. However, Betfair believes that this type of structure is much more transparent than traditional bookies. Betfair attributes this transparency to its refusal to accept anonymous bets and its “know your customer” procedure. Betfair has done much in the way of assisting gambling industry regulators in their jobs by providing a very transparent operating system.

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