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http://www.egrmagazine.com/features/1696157/qanda-stephen-morana-cfo-betfair.thtml
Q&A: Stephen Morana, CFO, Betfair 22/09/2011
Interview by James Bennett
eGaming Review (eGR): Why has the share price taken such a hammering since you listed?
Stephen Morana (SM): There are several reasons. The first I’ve got to take on the chin. It’s a cardinal sin for a newly listed public company to miss its targets. We missed a couple of percentage points on our topline revenue but hit our profit, but it scared people, the market and potential investors. We guided that we’d had a really poor November and December but we’d had a couple of periods and that was enough.
We also didn’t put enough free flow into the market. We only sold 17% and in hindsight we should have sold more.
The regulatory picture has changed in the past 12 months. You can’t really worry about long-term regulation, it’s going to happen and you play by the new rules. But short-term, when countries are looking to bring in regulation when there previously was none, and especially when you get the likes of a Greece or a Germany, who initially try and bring in regulation that is flawed and isn’t EU-compliant, it can scare a lot of people. It has a very negative impact on the sector as a whole.
eGR: In hindsight, was the timing and the amount you chose to list the right play?
SM: We started seriously looking at an IPO for the first time in 2005 but a number of investment banks advised us the time wasn’t right. We didn’t get out of the starting blocks if I’m honest. Was it the right time to go? You’ll never know, but the IPO markets look closed at the moment. What we have now is existing shareholders that have the flexibility to sell and new shareholders that have the chance to get on board.
There’s not a lot of liquidity in our stock at the moment so even though the price has been down, it has since risen and has been resilient during the past month or so. Existing shareholders are comfortable at £13 and feel the business is misunderstood and confident in the long-term business model, the people who aren’t in at the moment are looking at the sector and at us saying ‘has it really hit the bottom? Is there more regulatory bad news to come, maybe I’ll hold out’.
eGR: What would be your message to shareholders concerned with the fear factors involved with trading in gaming stocks?
SM: Nothing has changed. This is a vibrant business and one that has many ways of growing. We are coming to the end of a big re-architecture programme and put in place all of the building blocks for growth. There are products we can throw on which will add significant value to us, the business is profitable and we have got a very engaged and energised workforce. A lot of people are looking at the share price and thinking it is too low, this is a business that if you really understand, the existing exchange model is still an absolute game changer.
Q&A: Stephen Morana, CFO, Betfair 22/09/2011
Interview by James Bennett
eGaming Review (eGR): Why has the share price taken such a hammering since you listed?
Stephen Morana (SM): There are several reasons. The first I’ve got to take on the chin. It’s a cardinal sin for a newly listed public company to miss its targets. We missed a couple of percentage points on our topline revenue but hit our profit, but it scared people, the market and potential investors. We guided that we’d had a really poor November and December but we’d had a couple of periods and that was enough.
We also didn’t put enough free flow into the market. We only sold 17% and in hindsight we should have sold more.
The regulatory picture has changed in the past 12 months. You can’t really worry about long-term regulation, it’s going to happen and you play by the new rules. But short-term, when countries are looking to bring in regulation when there previously was none, and especially when you get the likes of a Greece or a Germany, who initially try and bring in regulation that is flawed and isn’t EU-compliant, it can scare a lot of people. It has a very negative impact on the sector as a whole.
eGR: In hindsight, was the timing and the amount you chose to list the right play?
SM: We started seriously looking at an IPO for the first time in 2005 but a number of investment banks advised us the time wasn’t right. We didn’t get out of the starting blocks if I’m honest. Was it the right time to go? You’ll never know, but the IPO markets look closed at the moment. What we have now is existing shareholders that have the flexibility to sell and new shareholders that have the chance to get on board.
There’s not a lot of liquidity in our stock at the moment so even though the price has been down, it has since risen and has been resilient during the past month or so. Existing shareholders are comfortable at £13 and feel the business is misunderstood and confident in the long-term business model, the people who aren’t in at the moment are looking at the sector and at us saying ‘has it really hit the bottom? Is there more regulatory bad news to come, maybe I’ll hold out’.
eGR: What would be your message to shareholders concerned with the fear factors involved with trading in gaming stocks?
SM: Nothing has changed. This is a vibrant business and one that has many ways of growing. We are coming to the end of a big re-architecture programme and put in place all of the building blocks for growth. There are products we can throw on which will add significant value to us, the business is profitable and we have got a very engaged and energised workforce. A lot of people are looking at the share price and thinking it is too low, this is a business that if you really understand, the existing exchange model is still an absolute game changer.
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There are products we can throw on which will add significant value to us
Oh good, I can hardly wait.
Oh good, I can hardly wait.
But the exchange model is not a game changer because, in its pure form, it doesn't displace the high st. and doesn't make enough for the operator.
Then again, when you **** the pitch to make things harder for higher-margin exchange winners, you lose liquidity in your minor markets, you alienate your strongest supporters and (to a lesser degree) you have to give up being best price pre-event for anything but horses.
My read is that Stephen Morana understands these probs. well enough for all his talk of numbers. He is playing a bad hand well here.
Then again, when you **** the pitch to make things harder for higher-margin exchange winners, you lose liquidity in your minor markets, you alienate your strongest supporters and (to a lesser degree) you have to give up being best price pre-event for anything but horses.
My read is that Stephen Morana understands these probs. well enough for all his talk of numbers. He is playing a bad hand well here.
*when you skew the pict, when you tilt the playing field
I am interested in what their mooted 'margin improvements' are going to be. My guess is on 20% weekly decay on comm.
I am interested in what their mooted 'margin improvements' are going to be. My guess is on 20% weekly decay on comm.
strong rumor of shift from 2 to 5%, up to 2.25 to 5.25%.
"There are several reasons. The first I’ve got to take on the chin. It’s a cardinal sin for a newly listed public company to miss its targets. "
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More bad decisions. More difficulty with long term consequences because of unrealistic short term targets incoming. It's really hard to mess up an exchange business model, but growth without a plan and a business degree may just be enough here.
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More bad decisions. More difficulty with long term consequences because of unrealistic short term targets incoming. It's really hard to mess up an exchange business model, but growth without a plan and a business degree may just be enough here.
strong rumor of shift from 2 to 5%, up to 2.25 to 5.25%.
Hahahahahaha. Can anyone name any other internet service that isn't cheaper now than 10 years ago? Scary thing is that I don't feel 100% confident that it's a false rumor.
Hahahahahaha. Can anyone name any other internet service that isn't cheaper now than 10 years ago? Scary thing is that I don't feel 100% confident that it's a false rumor.
ballabriggs, that wd surely be disastrous for them.
It wd result in a FAR greater leak to their exchange competitor than just shooing away pc winners.
In fact, if they effectively exile the small value players (wh/ will take 3-4 weeks if these people are peeved and temporarily stay on the sidelines) and the middle-sized market-makers, it's hard to see who they will have left. (Though I guess some arbers will want to take both sides of the bet here).
Perhaps huge turnover winners servicing whales--wh/ strangely enough was the daq's starting model.
It wd result in a FAR greater leak to their exchange competitor than just shooing away pc winners.
In fact, if they effectively exile the small value players (wh/ will take 3-4 weeks if these people are peeved and temporarily stay on the sidelines) and the middle-sized market-makers, it's hard to see who they will have left. (Though I guess some arbers will want to take both sides of the bet here).
Perhaps huge turnover winners servicing whales--wh/ strangely enough was the daq's starting model.
There are products we can throw on which will add significant value to us
It's unfortunate that betfair's track-record on new product hasn't been great (somewhere, a pixelated vet put down several pixelated horses leaving pixelated blood on betfair's hands).
Betfair have made several successful enhancements to the platform.
As one that has watched the 'evolution', there are some "enhancements" that have been there for years but I'm surprised they haven't been incorporated.
I still stand by statements in the past that not enough of betfair's team actually spent time on the exchange itself.
It's unfortunate that betfair's track-record on new product hasn't been great (somewhere, a pixelated vet put down several pixelated horses leaving pixelated blood on betfair's hands).
Betfair have made several successful enhancements to the platform.
As one that has watched the 'evolution', there are some "enhancements" that have been there for years but I'm surprised they haven't been incorporated.
I still stand by statements in the past that not enough of betfair's team actually spent time on the exchange itself.
I doubt the average punter will even care or notice about paying an extra .25 or a percentage point in commission.
we hear these doom and gloom stories about people jumping ship to **** all the time. I personally don't see it happening, and the fact that **** haven't been really able to take advantage after all the ****-ups betfair have made makes me think they are more likely to go under rather than grow.
we hear these doom and gloom stories about people jumping ship to **** all the time. I personally don't see it happening, and the fact that **** haven't been really able to take advantage after all the ****-ups betfair have made makes me think they are more likely to go under rather than grow.
Plugging leaks in profits is one thing but scouring every source of extra income is quite worrying and I would agree totally with Mythical princes statement
I wonder if the 3% used for implied would change if 2.25-5.25 were introduced. Never seen anything to justify the 3%, has anyone else?
Bf said that the actual weighted average of commission generated taking into account counterparties' comm. rates was something like 3 point something e.g. 3.225, but this was too confusing and that bettors wd appreciate the simplicity of 3%.
Obviously the change was an earner for them.
Disagree w/ mythical prince over the 'average bettor'--the average bettor is not on here but with laddies, 3.65 etc. If you can look at a comparison site and work out where the best price is, you can work out whether it's to yr advantage to be w/ one of bf's exchange rivals.
It's clear to me something w/ a lucid mind at bf has said (internally and to investors), 'our model is having winners on a profit share of around 50/50 servicing recreational losers', but sadly the betting world (liquidity, early markets, minor markets etc.) is more complicated than this.
Bf will have to pay me more than they're currently doing to price-set or I will get accommodated elsewhere.
Obviously the change was an earner for them.
Disagree w/ mythical prince over the 'average bettor'--the average bettor is not on here but with laddies, 3.65 etc. If you can look at a comparison site and work out where the best price is, you can work out whether it's to yr advantage to be w/ one of bf's exchange rivals.
It's clear to me something w/ a lucid mind at bf has said (internally and to investors), 'our model is having winners on a profit share of around 50/50 servicing recreational losers', but sadly the betting world (liquidity, early markets, minor markets etc.) is more complicated than this.
Bf will have to pay me more than they're currently doing to price-set or I will get accommodated elsewhere.
They did say that yes, I think they gave the number at 3.1x or so
Anyone have any estimates of how much that 0.1% difference earns them?
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