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Welcome to the News desk. |
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Betfair dips on Spanish gaming regulation concerns |
10/06/2011 |
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Nick Fletcher |
Betfair, the world's largest online betting
exchange, is under pressure on growing worries about European gaming
regulation
The company - which joined the stock market in October at
£13 a share - dipped 5p to 825p as Spain became the latest area to cause
concern. Paul Leyland at Investec issued a sell note following signs from Spain
that approval of betting exchanges could be delayed. He said: |
'A conference took
place yesterday in Madrid, during which Spanish regulators gave more colour on
the potential future shape of the online gambling market. One of the
suggestions was that not all products would be available in the first wave and
some may have to wait, including exchanges. This reinforces our view that even
'positive' regulation can have a sting in the tail, which could materially
impact 2012-13 forecasts. We therefore reiterate our sell recommendation and
445p discounted cash flow based price target.
'We see this as a
three-fold problem for Betfair. First, and most obviously, if this approach is
adopted, then on regulation Betfair is likely to lose most of its 4% or so of
core revenue from Spain as well as its key USP, even if it gets a licence for
other products; given the high fixed cost base and capex, the impact on free
cash flow would be material, in our view.
Secondly, Betfair may not get
early certainty on when exchanges will be allowed and under what terms, making
forward investment in the market and product difficult. Finally, competing
against more settled betting brands and products (with incumbent lobbying
power) is likely to be far less attractive than being part of an early
regulated 'land-grab', leveraging an existing '.com' presence.' |
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Other countries are already cool on betting exchanges, including
Italy and France and possibly Cyprus, Germany and Greece. In fact Betfair this
week said it had filed a complaint with the European Commission about Greece's
draft gaming law, which it said unfairly excluded it from the
market.
Editor's Note The insiders, Betfair's long-standing
investors who still dominate the share register, will have some of their
lock-up agreements come off in the autumn. Should be very telling if they press
the 'sell' button when the shares are way off the floatation
price.
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