Why is there no-one with a good word about BF on here, but the share price is roaring ahead?

Because the more money they make, the more they have taken off their customers?  ie, the people that post on this forum...

Just a guess....

There's a lot of people representing  those who want to see betting exchanges fail. Just saying.

Not being an expert in such matters I turned to mark davies blog.

1. The stock is not very liquid
2. SoftBank were known to be keen to sell, thus some short the stock.  SoftBank sold in July, so less downward pressure.
3. The management have turned things around in last 12 months ( that's his opinion as a shareholder, not mine)

Read the blog here
http://www.markxdavies.com/2013/07/08/softbank-sell-out/

The share price is now nicely above the failed bid price earlier this year, but a long way off from the issue price of £13 (and many paid £15 for the shares in the early days of floatation) Not sure I would call that 'roaring ahead' particularly as the FTSE is within a whisker of it's all time high.

Cost cutting is as expected having the desired affect on profitability, hence the improvement in the share price but long term question marks remain for this company. The current share price provides an opportunity for shareholders who bought at the outset to sell their shares and reduce their losses imo

The important price will be the one when Breon Corcoran took over.  At a complete guess, it may have been around the 700 mark, so to see it up 50% is a more than fair achievement.  A lot of the stuff that has been done is short term sticking plaster - great for now, but with real damage to the ecosystem down the line - but it is unlikely that long term considerations have enough weighting in BF's equity valuation.

THEY WILL BE LOOKING FOR A BUMPER YEAR NEXT YEAR WITH THE WORLD CUP

I THINK IT WOULD BE A NICE GESTURE IF BETFAIR GAVE THEIR SHAREHOLDERS A FREE TEE SHIRT WITH WORLDCUP 2014 ON IT

OR A NIGHT DRESS FOR THE LADIES WITH
I LOVE WORLD CUP WILLY ON IT

NO DONT DO THAT ,THERE MIGHT BE A BABY BOOM

ballabriggs - think your guess of circa £7 may be right. Dont know if BC is a good or bad CEO - only time will tell, and I suspect he will be gone within a couple of years having taken the cost cutting exercise as far as he can, and then look for his next job.

Cost cutting means for same revenues profits are up. It had to be done. There is also a lot of talk about this £150m (?) on the balance sheet waiting to be deployed.

This has papered over the problems on the revenue side. They have gone with the sportsbook and its associated setup and running costs and possible canablisation of the exchange. Time will tell if this increases overall profits.

Elephant in the room is if the point of consumption tax comes in next year in the UK.

Now that revenues are from very few countries a 15% gross profits tax on UK customers from next year could take 8 figures off the firms profits.

Maybe this is why they are experimenting with different commissions. In Australia the move to 6.5% led to increased revenues. In their case it was offset by fees. It shows in many runner markets they may be able to increase commission and increase revenue.

I wonder how equipped some of the analysts and others are to make judgements.

this is essentially a unique business, to whose prospects they can't apply ready-made analytical methods. easier to just take stuff they're told and shown at face value than start from first principles and work out how things are likely to pan out for themselves.

How would the point of consumption tax work frog2?  Any ideas?  Is it a Tobin tax?

http://zolmax.com/betfair-group-price-target-raised-to-gbx-1150-at-citigroup-inc-bet/106942/

Betfair Group Price Target Raised to GBX 1,150 at Citigroup Inc. (BET)

Posted by Stuart Ham on Sep 10th, 2013 // No Comments

Betfair Group logoInvestment analysts at Citigroup Inc. boosted their target price on shares of Betfair Group (LON:BET) from GBX 975 ($15.24) to GBX 1,150 ($17.98) in a note issued to investors on Tuesday, Analyst Ratings Network.com reports. The firm currently has a “buy” rating on the stock. Citigroup Inc.’s target price suggests a potential upside of 13.41% from the stock’s previous close.

Shares of Betfair Group (LON:BET) opened at 1032.00 on Tuesday. Betfair Group has a 52-week low of GBX 259.00 and a 52-week high of GBX 1024.00. The stock’s 50-day moving average is GBX 959.0 and its 200-day moving average is GBX 835.9.
A number of other analysts have also recently weighed in on BET. Analysts at Morgan Stanley reiterated an “overweight” rating on shares of Betfair Group (LON:BET) in a research note to investors on Friday. They now have a GBX 1,050 ($16.42) price target on the stock. Separately, analysts at JPMorgan Chase & Co. reiterated a “neutral” rating on shares of Betfair Group (LON:BET) in a research note to investors on Friday. Finally, analysts at Numis Securities Ltd raised their price target on shares of Betfair Group (LON:BET) from GBX 1,100 ($17.20) to GBX 1,200 ($18.76) in a research note to investors on Thursday, September 5th. They now have a “buy” rating on the stock.

One equities research analyst has rated the stock with a sell rating, four have assigned a hold rating and nine have issued a buy rating to the stock. The stock currently has a consensus rating of “Buy” and an average target price of GBX 1,017.92 ($15.91).
Betfair Group plc is an online betting and gaming operator. The Company’s segments include Sports, Games, Poker, Management of customer funds, Other investments, Betfair US, LMAX and High rollers.

"Betfair Group has a 52-week low of GBX 259.00" looks like cobblers.

"The Company’s segments include Sports, Games, Poker, Management of customer funds, Other investments, Betfair US, LMAX and High rollers." looks like poorly researched cobblers with the LMAX refeence.

Numis Securities were also involved in the original IPO, making a tidy wedge out of it, so is their bullish forecast for Betfair linked to that,....?

Offshore bookmakers are set to face a 15% gross profit tax on profits from UK based customers from 1st December 2014.

It is estimated that it could raise £300m.

Legislation to be included in 2014 Budget I understand.

About time too I say.

why are they all still here then?

Underlying EPS is improving because of cost-cutting and because (to a lesser degree) of a new understanding that a best-price exchange on certain markets needs much less marketing spend breaking new territories than had been anticipated.

This cost-cutting doesn't have much more to run. By then bf mgmt. want to have in place a system for getting a fatter margin by serving as a second middleman between FO punters and the exchange. But I don't think there are enough punters who will only bet w/ bf FO for this to work.

They have an OK two-year strategy and a weak 5-year strategy--and the misalignment of shareholder and managerial interests is only going to make this worse.

Askari, it does seem obvious that shareholder and managerial interests are pulling in opposite directions.  Do you think current management think this too?

good post, askari.

the essential question seems to me to be: how reasonable is it to believe that the eventual revenue from the sportsbook will justify current management strategy?

viva el presidente!, maybe "how reasonable is it to believe that the eventual revenue from the sportsbook minus lost money from the exchange as a result of the sportsbook cherry-picking will justify current management strategy" would be apt,..

Andrew Black sold more shares today....According to betangel blog

http://www.betangel.com/blog_wp/2013/09/13/andrew-black-betfair-shares/

well, I think that's kind of implicit, ballabriggs; and I was trying to phrase the question as neutrally as possible.

sorry :)

the essential question seems to me to be: how reasonable is it to believe that the eventual revenue from the sportsbook will justify current management strategy?

It is unreasonable, because there are not enough people in bf's 'safe' territories that fit the mgmt.'s criteria--people intimidated to begin w/ by the exchange but who want to have a bet.

First of all, the territories are too small and saturated; next, the prospective new players will not bet big enough to need to be price-sensitive, so will have no need to find bf and then educate themselves about it; and last because the new players will be digital natives and will have no probs. finding best price and taking advantage of it when they become serious about winning and want to bet more.

The strategy is full of holes. It depends on a continually replenishing stream of £20 on a mobile impulse punters on IR sports.

In fact the future is in a platform serving every professional on the planet.

Ballabriggs, imv the mgmt. know but the Chairman and board don't. When the chairman writes, 'we are introducing a simpler product line to appeal to a broader customer base', he believes it.

He believes that new punters will be drawn in by the sportsbook and migrate to the exchange; he doesn't think that the sb cannibalises exchange revenues or damages bf's partners / liquidity providers or increases customer churn. He wd be horrified and almost certainly in denial after a conversation w/ y/s or frog or anyone whose livelihood has depended for a long period of time on understanding the exchange market.

Interesting askari.  The CEO is obviously shrewd in this industry, but looking at the Chairman's past, he has worked in making condoms and running Woolworths.  Then there is stuff like this, from the Daily Heil

http://www.dailymail.co.uk/news/article-55312/Anger-Railtrack-boss-deal.html

"Anger over Railtrack boss deal

They have already accused Mr Corbett of having blood on his hands and demanded he face charges of corporate manslaughter as the head of a company largely blamed for the tragedies at Paddington and Hatfield."

It is hard to imagine him having a better grasp of why the second and third derivatives of BF's share price movement might be moving in a strongly opposite direction to the actual share price and first derivative, compared to frog/viva el presidente/you et al.  [i.e. short term sportsbook cannibalisation of the exchange might reap bumper loot in the short term, but be very toxic to liquidity especially in side markets in the long term]. 

It is worrying to read

"Paddington survivor Tony Knox, 42, said yesterday: 'I find it totally bemusing that you can pay someone so much money for failing in their job.'
He added: 'Lord Cullen in his report fell just short of calling Mr Corbett an utter buffoon. What does this say about the system for rewarding him?'"

Tbh, BF want to be 365, offer poor prices, fun adverts, bad value, and have very few if any winners (and no forum).  They have looked at the bumper profits from servicing recreational gamblers, and that is surely their first choice.  They probably have the chance to be the best exchange (for now) in the world, but BF's adverts have been so poor, their raison d'etre is confused, the message is splintered, the sportsbook v exchange is pulling in opposite directions, and the chances of knocking 365 "off their perch" are very faint.  That could change if they hired a really outstanding team, in the way twitter and facebook aggressively hired the best programmers they could find, but looking at their crack trading team, as just one example, it really doesn't look like a world beater at the moment.  The guy who was leading it, and championed by Betfair, Craig Mucklow, has already left anyway.

The guy who was leading it, and championed by Betfair, Craig Mucklow, has already left anyway.

There is no longer any need for traders now that 'best price execution' (a fatter margin through setting up another middleman procedure) is coming in. The aim of these traders was NOT TO LOSE in the first six months of bf's sportsbook--not to alarm the market, not to lose bf's investors wedded to the exchange-and-commission model. They did this job adequately and mgmt. will now want to automate price generation for the sportsbook and to add 'exchange-lite' features as selling points.

It wd be an absolute triumph for Breon Corcoran if he could sell bf at 1400, say, in 18 months' time. He wd say that the float price was always unrealistic, given the headroom in bf's home market and regulatory headwinds abroad. He cd then go on to another industry job, to a listed or unlisted spread betting or forex firm, to a chairman-type role in social media or gaming or to a portfolio career in 3 or 4 companies. The biggest risk to him is staying w/ the exchange model (that has not kept up a growth trajectory in all its years of being listed) and doing no better on shareholder-return measures than previous CEOs. The alignment of managerial and long-term shareholder (or market) interests is terrible, but it's only apparent to a few students of the industry.

The CEO told investors the goal was to be a second tier sportsbook. It appears that they have no intention of 'knocking three65 off its perch'.

BF benefited hugely because of the original exchange commission structure.  Start at 5%, the more you bet, the lower it got towards 2%.  If two exchanges had this system, it was better to bet solely with one and be on say 3% here, than bet on both and be on 4% on both. 

The sportsbook has no such natural advantage in this way.  There is no reason to stay loyal.  Every bet placed away from BF before, instead of on BF, meant your commission rate inched higher on here. 

Aiming to be a second rate sportsbook sounds ridiculous.  You either aim to be the best, or forget it.  With a sportsbook you don't have a natural monopoly, which means you have to beat what is out there.  BF taking for granted that customers will stay with a second rate sportsbook (which is what a second tier sportsbook is) looks alarming. How many kids now are growing up wanting to be Warren Weir?  Every kid wants to be Usain Bolt.  BF is never going to be a second tier sportsbook. It is either going to have to innovate (and fix existing problems like poor customer service) to try to be the very best, or it is as a sportsbook itself going to be cannibalised by the bigger fry.  Actually aiming to be a second tier sportsbook is, well, baffling.

As for best price execution, does that not mean offering the exchange price where there are already bets available (markets are liquid) ? The sportsbook should be offering the best price from the exchange, plus some seeding of side markets where liquidity needs a kick start.  You can automatically tailor it to offer bigger limits automatically to losing accounts.

BC will beat previous CEOs shareholder return levels, because the equity analysts aren't properly using the correct models to value BF.  It is more sophisticated and delicate than other betting companies.

'Best price execution' means that the exchange market and a customer-specific risk-taking algorithm replace the 'crack trading team', as you say. But surely the temptation will be to improve margins by adding on a 'second' commission or by going 'down' in the market as far as is needed to provide a cushion e.g. to be able to 'get out' at a certain margin of profit.

The long-term incentive plan offered to the company's ceo and cfo only makes 25% of these bonuses (down from 50%) dependent on relative performance against the 'total shareholder return' bf's market-listed peer group (including Rank, Sportingbet and 888). This is another crazy regressive step--for instance, it incentivises the mgmt. issuing a special dividend out of the company's positive cash balances should they be doing badly on a three-year basis.

Are there any good published papers exploring the damage front-running does (or doesn't,...) do to markets?  BF always competed well on price because the cost of hiring a trading team was outsourced to its customers, in return for letting a percentage of winnings go to a few winning clients. 

Hiring the crack team has been costly to start with, plus image/reputational damage too, and confusing the brand.  If BF's vision is to try to allow customers to generate the prices, but set up a sportsbook to divert recreational users to, meaning BF benefit from the price signals but offer far less incentive to users to generate those signals, and BF then front-run the markets, this is going to have bad long term consequences for BF.  The golden goose can't be frontrun forever. If the BF market prices a rugby team at evens to win a match, front-running the market with a sportsbook, trying to encourage customers to take 5/6 just seems mean. BF need to decide if in the long term they are prepared to tolerate winners at all (who knows?), because the pricing signals are going to become much fainter from reducing market activity, especially in side markets. [Ending up with nobody pricing them up at all]. 

I suspect in 6 or 7 years time, a future CEO will be charged with reversing a steep decline in BF's fortunes, and will announce BF are ditching the sportsbook, and going back to being a clean exchange.  The current CEO will do fine, and the one in 6/7 years will do fine.  The one in the middle is going to tear their hair out :-D

BF need to decide if in the long term they are prepared to tolerate winners at all
____________

They've made it clear they're not welcome already with the supercharge ,and that threshold will get lower don't worry yourself   - they know you obviously have to have winners on an exchange by it's very nature ...   they simply want winners who don't win at a fast rate .

the panic would set in when hardly anyone is seeding the markets on big events - but it  would never be allowed to get to that stage  ,the mickey mouse events are of no consequence -i'm surprised they even list half of them tbh

http://en.wikipedia.org/wiki/Front_running

Front running is the illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage, since it can expect to close out its position at a profit based on the new price level. The front running broker either buys for his own account (before filling customer buy orders that drive up the price), or sells (where the broker sells for its own account, before filling customer sell orders that drive down the price).

Allegations of front running occasionally arise in stock and commodity exchanges, in scandals concerning floor brokers and exchange specialists.

Don't really see how the sportsbook isn't culpable of front-running.  Any opinions?  Offering 5/6 on the sportsbook on an evens shot from the exchange, knowing that market equilibrium has been reached (and having the data available as to which way winning/losing accounts are betting) is taking advantage of pending orders that have been left up.  A BF customer who would have been matched laying at evens, also now has their bet unmatched, as the sportsbook lays it at 5/6 to the person who would have been able to take evens on the exchange.  You can bet your bottom dollar though, that should the exchange price move to 1.8, the 5/6 on the sportsbook would move too.  That's where there is a big problem.  An independent price setting team would be fine if they took a view, but relying on BF customers to do the legwork, for a much reduced share of the pie as bets placed into the exchange are picked off and dwindle, is likely to damage BF.

Front-running or not, this kind of behaviour is harmful to the ecosystem.

If people are taking prices the situation is no different from a bookie gaining knowledge from what their customers are doing. A trainer backs his own horse with them and they back it more with another bookie and shorten the odds. A trainer backs another horse in the field the bookie knows he lay the trainer's one etc.

On the exchange side the betting exchange can see people are making money when books go over 100% and they can set up a cross matcher and have the cash for themselves. This happened afew years ago. At that point Betfair crossed the line.

The real problem comes if/when they actually start front running. If a winning backer or layer is leaving money up on the exchange and they are jumping infront of his money before he can even get matched. This could be through the sportsbook or on the actual exchange.

Any of this sort of behavour would destroy confidence in big players leaving money up for others to take. Visual liquidity would drop like a stone.

There is clearly a conflict of interest between running a sportsbook and a free market exchange unless their are guarentees that the sportsbook traders/algorithms have zero access to data on winning/losing exchange customers.

winnig punters strategies are so complex that it would be almost impossible to copy them imo

Askari1, that is a very interesting point you make about the special dividend.  Would like to know more about how you think that might come into play.

Coachbuster, it is hard to copy winning strategies, to try to derive efficient prices.  It is easy to build a sportsbook, let BF customers derive an equilibrium price of say evens, and then offer 5/6 on the sportsbook.  If the price then moved on the exchange to 1.8, the sportsbook price would then be moved.  This is short-circuiting the market.  The sportsbook price is dictated by the exchange price.  Having an exchange business model where you save the cost of a trading team, letting customers set prices amongst themselves, relies upon having some reward going to customers, ideally equivalent to the cost saved in hiring a trading team.  If you are planning to rely on customers doing the hard work to generate the prices, but then diverting recreational users to the sportsbook, in the end, people will bet a lot less with the exchange, as a lot of bets that would have been matched originally, are left unmatched. Winning strategies are harmed without any need to copy them.

Ballabrigs - short circuiting , which is basically the work of a bookie too   (they must surely get their prices via way of the exchange -  i could be wrong !)

If the sportsbook succeeds which it could well do given the correct marketing, then it could well finish off the exchange  unless it's easier to find in the first place.

I'm not sure what BF would gain from letting the exchange die completely , surely if 10s of bookmakers  (inc Bet 365 comparative newcomers ) can succeed alongside a healthy exchange then so can the sportsbook ,it would just have to be given a different platform .

Bet 365 customers on the whole are of a different make up to exchange customers  ,so there is room for the two imo -  advertising would have to be addressed differently too.

The question i would like to ask is Will there ever be a time when there is no exchange due to economic reasons ?

The exchange has survived both an economic boom (2000-07) and bust (07 onwards) so it appears it can survive both. The only thing that can really kill the exchange is betfair themselves, and if they do we must hope that one of the rivals takes up the mantle big time.

Share price has broken the 1100p mark.

ballabriggs, 25% of the long-term incentive plan of the CEO & CFO is dependent on bf's relative performance (in terms of total shareholder return i.e. not share price by itself) against a peer group. The peer group is nine listed sportsbooks (Laddies, 999, Mountains, Playtech, Irish, Unsportingbet, Dank and two not listed in London, Loonybet and b.lose party entertainment).

Now let's say in one year that Laddies buy 999 and Playtech, Mountains buy Unsporting and Dank go private). This will put bf immediately in the bottom half of its comparison cohort. The cost to the CEO is immediately about £380,000. In these circumstances the temptation will be to go for something market-pleasing (either promising or issuing a special dividend) to keep the share price up with competitors.

Coach, imv it's not so much 3.65 surviving alongside the exchange as them surviving because of the tissue they get for free. They can then select their customers and run a tighter margin that wd be normal for a bm.

The sportsbook aim is to use the exchange price as tissue, and then generate prices 15 to 20% shorter.  Hopefully customers won't notice.

If the share price is under pressure, maybe they could cunningly have a second sportsbook, hiding both the exchange and the original sportsbook, and the new sportsbook offers prices 15 to 20% shorter than the original sportsbook.  If people are too dim to take a better price on the exchange first time round, they'll probably be willing to take the 2nd sportsbook price. 

Maybe BF could just launch a DepositBook.  You deposit money into it, and you lose.  Would save a lot of time waiting for the results of actual events, thus making customers better off.  I can see the launch now "BF have decided to launch our new DepositBook, giving you all the convenience of using a bookmaker, without any hassle or stress of waiting for the results of fixtures.  By losing your money immediately, BF customers can now spend those precious hours with their wives and children, making the most of life."

betfair as somewhere to bet has dramatically gone downhill. website crap, pricing system crap (how they get away with charging some people 7% and others 5% is beyond me), premium charge is totally crap, liquidity mostly crap bar big games, customer service crap, sportsbook utter crap. it's just crap.

share price going up because they are milking the customers.

Low interest rates = share bubble

But still the greatest thing since sliced bread for the serious punter.

john92 21 Sep 13 16:39 Joined: 13 Jan 05 | Topic/replies: 2,265 | Blogger: john92's blog
Low interest rates = share bubble

------

partly true, but not relevant to the price relative to other firms.

Strongly disagree with you (for probably only the first time) on that one viva el presidente.  BF are strongly likely to have a different customer demographic profile to many other firms, especially ones with heavy bricks and mortar presence.  The BF exchange is much more attractive to wealthier demographics, and rising equity/house prices will encourage those types of customers to be a lot more bullish.  It would be a major surprise to me if a share bubble did not mean BF's price relative to other firms increased.

well, to be clear I was answering the specific narrow point that cheap money pushes up stock values generally. in itself that doesn't explain BF rising relative to other companies.

A company with a relatively steady profit and no debt is likely to be an attractive option in a share bubble.

Interesting tweet from a couple of hours ago, Still waiting to see if MD answers!

.
https://twitter.com/search?q=markxdavies&src=typd


Mark Davies ‏@markxdavies 2h

Just walking past 45 Russell Square. Inexplicably, there's no blue plaque on the wall: "From this building, Betfair launched in 2000"



Stuart Purling ‏@PURLINGS 2h

@markxdavies how do you feel now the exchange is slowly being marginalised in pref for the sportsbook where they just become another bookie?


12:29 PM - 25 Sep 13 · Details

Mark Davies @markxdavies

@Steve3245Jones @PURLINGS have written about that at some length on my blog in the past. (We'd moved out of that building by Sept 2000)
3:41pm · 25 Sep 13 · Twitter for BlackBerry

http://www.betangel.com/blog_wp/2013/09/25/betfair_investor_cash_out/

News today that Balderton Capital ‘cashed out’ it’s remaining investment in Betfair.

An RNS notice appeared today showing that Balderton had sold 4,227,170 shares bringing their holding from 4.04% to 0%.

The significance of this is that Balderton were one of the original investors. To quote their website: -

“Balderton’s original investment in Betfair was made in 2000 and it remains one of the largest institutional shareholders post the listing. The partners have been actively involved in the development of the business since its formation and Tim Bunting served as chairman in 2006.”

Richard Koch also lowered his holding again by selling another 1m shares.

I’d have to say I’m not surprised to see people selling after the run up in price, but seeing Balderton completely cash out was a surprise.

For those who didn't open the link, the words in my previous post are from the website.  They are not my words.

why are all these people who have held shares in betfair for years and some since the start , now selling up ?

apart from the share price being quite high at the moment ( although not near flotation levels ) what do they know or what have they heard that has made them sell up ?

Lol, maybe your being sarcastic rcing? Have you not read the majority of threads on here or looked at liquidity recently?  If not have a look at "THE PREMIUM CHARGE MUST BE SCRAPPED" thread.

*you're