"The late Jeffrey Bernard famously observed that he fell in love with gambling as a child when introduced to a racecourse by his father. His father pointed out that one could easily see how bookmakers made their money, as there were four windows ..."
I liked your post; you are correct than on-line bookmakers will try to stop successful bettors, while Betfair loves high stake bettors because they have no risk and want as high a volume as possible. What you are wrong about is that older people prefer betting shops to on-line. NO WAY as they say, for the simple reason that you get far better odds on-line than you do in betting shops. If you go into a betting shop (I do just to read the Racing Posr for free) what you will see is young(ish) people playing fruit machines.
"In 1965, an American entrepreneur named Tom Monaghan hit on an idea for a chain of pizza restaurants. Starting with just three outlets, LSE:DOM:Domino's Pizza went on to become the biggest pizza chain in the world. A UK franchise opened in 1985 ..."
Yes I think that the Betfair/Paddy Power combination has a bright future as the merged company will have the best exchange platform and the best marketing skills in the industry. In contrast I can't get excited by the merger of Coral and Ladbrokes as merging two relatively unsuccessful companies will not make a successful one but I don't know whether it would be worth shorting Ladbrokes as there will be some cost savings if the merger goes through. In answer to your query, I'm afraid my safe betting strategy, although worthwhile, is not revolutionary as it just requires a disciplined approach to the many promotions available each week on online bookmaker sites.
Hope you see this...
3 more questions:
1. You seem to be a seasoned bettor. When you say "banned (through stake limitation) from all the main online bookmakers because of winning regularly", how can that be? How much are you winning, what are you betting on and how can they all be banning you for winning? Seems illogical to me, but if you are, care to share your strategy, or hints of it please?
2. I have been using Betdaq and Betfair and never use the high street. In my opinion, the high street has its days numbered and Betdaq is really really bad, especially compared to Betfair, so much so that I am considering shorting LAD atm. Is that something you recommend, what do you think the future holds for LAD and Betdaq and finally
3. I think Betfair has a very bright future still, but is their SP not overvalued by now?
There are a couple of points recently raised which I will express my opinion on. Firstly, traditional bookmakers and online exchanges do indeed compete with each other but they also target different audiences. I have been a regular bettor for over 10 years but have never been in a betting shop in my life, others (particularly older people) tend to enjoy the experience of going into betting shops, so there are different audiences. Many people such as me are effectively banned (through stake limitation) from all the main online bookmakers because of winning regularly even though I am not a professional bettor so I there is no competition for these stakes - they have to go on the exchanges. The strength of Betfair is its liquidity. If anyone is in any doubt, just check out the surge of money in the last 10 minutes before the start of a UK horse race or any UK professional football match. Outside this period there is indeed reduced liquidity but as a bettor, it has always been easier for me to place a large bet on Betfair than with an online bookmaker, even before my stakes were limited. Quite often if I wanted to put a large stake on at an online bookmaker I would need to go through an automated procedure where my stake was considered by a trader at the bookmaker and then was accepted or reduced according to what the trader thought. This normally only takes 30 seconds or so but it can be a problem if the odds are changing quickly! This problem never occurs at Betfair as you know what money is available and can always make use of it, so liquidity is a reason I like Betfair. Liquidity at Betdaq for all but the biggest events is hopeless by comparison, although it is improving. Hope these comments based on practical experience are useful. Feel free to disagree as I welcome criticism as this helps form accurate opinions about a company.
You must be thinking of another company. At the moment (8.20) the TOTAL available to lay ALL the favourites for the six races at Epsom today is £210 at the best odds. Paddy Power makes a lot of its profit by laying bets to high rollers for five or six figure sums. Why do you think that an owner who wants to bet £500 on their own horse on the morning of a race won't even consider Betfair despite having slightly better odds (whose advantage is commonly wiped out by commission)?
There is clearly a lot of detail that is not currently known, but both companies must believe a merger would reduce their cost base. In fact, both businesses compliment each other, rather than competing with each other. What is happening is that for most of the time Betfair is creating the market and bookmakers offer fractionally below the odds as defined by the market. Punters back the horses and bookmakers unload some of their liability on Betfair. Thus it is a win win situation for both companies.
The proposed split seems to favour Betfair as based on the current share price for both companies, Paddy Power shareholders should be getting a higher percentage of the merged company.
Have I got this right ? The merged company will be H'Q ed in Eire but will have a secondary, overseas listing on the Dublin Stock Exchange because, I suppose, it wants a FTSE 100 position. The merger will be ratified by the Irish legislature but will be subject, solely, to English and Welsh law.. The annual accounts will be merged into Betfair's financial statements. As there does not appear to be any formulae for ROE will they be in Euros, and if so, will the dividends follow ? The companies will continue to be marketed as separate entities and so advertising etc. costs may actually rise. Anyone wish to tell me which bit I've got wrong?
Whilst I have been a little concerned about Betfair's focus on EBITDA as a measure of performance (rather than profits) I reckon that the merger with Paddy Power is a brilliant deal so I have become a shareholder again. I look forward to Paddy Power's online marketing expertise and business nous to be applied to Betfair's business. I am also attracted by the lower corporate tax rates which would apply to Betfair if the merged business became domiciled in Ireland - that could make a material difference to Betfair's profitability. The merged company could then buy up other profitable betting companies to take advantage of Ireland's low corporate tax rates. This would parallel what is happening in the US pharma industry where some US pharma companies are becoming Irish domiciled for the low tax rates (though they are not too keen on admitting to this). Let's hope the merger is consummated!
Surely a group of betting shops and online facilities offering their own odds are directly competing with a marketing system in which punters offer their own odds to others. The weakness of the former is that after paying for the estate, employees and higher overheads the odds on offer are worse than the direct competition. Betfair suffers from a lack of liquidity. You might find someone offering a horsed at 2/1 for £10 for a minor race on Monday afternoon , but if you want to bet £500 the cumulative odds could be nearer to 7/4 which are likely to be worse than those on offer at high street bookies. How are Betty Power going to stop one side of the merger competing directly with the other? it didn't work for Betdaq and Ladbrokes, so why now? In view of the logic of the LAD/Coral merger being that only digital capabilities are salient to monopoly positions, how are Betfair going to sell their prospective market position?
Any idea how Betfair and Paddy Power will fit together? Unless they intend t run down the PP estate won't one arm of the combined business be competing with the other? Look what happened after Ladbrokes took over Betdaq.
"It's been a successful year at LSE:BET:Betfair HQ, with a combination of the World Cup and a strong Cheltenham Festival and Grand National driving profits at the online betting firm. It's started this year in much the same vein, but the new 15% ..."
Yes they are doing very well. The Cheltenham turnover was huge too. I have held these at all prices below £10 and I felt sure that the new management would turn Betfair around after their
Experience from Paddy Power.
I bought these shares in the summer after noticing that about 45M was bet on the first game of the Football Worldcup, after remembering that their previous biggest event had been the first ashes match the previous year with 50M exchanged over 5 days. So with 32+ worldcup games I decided to take a punt and have never regretted my decision. I checked out the betting today on the England Bangladesh match £69.2M exchanged on the Match Odds alone (9M in the last 10 overs). Conclusion - Hold don't sell (IMHO)
I think, under the new regime, the company is genuinely progressing but it has had a huge amount of ground to make up. I have referred to that before, somewhat obliquely maybe, under - "I suspect some of the original founder/vendors now sleep sounder in their beds.
The original prospectus (which, to avoid action against myself or the site, I am sure was legal!) was a travesty. The discontinuation of certain operations and the now obligatory smoke and mirrors presented a picture which, so far as the man on the Clapham omnibus was concerned, failed, without huge deconstruction, to give the full story, or anything approaching it.
Breon Corcoran and the new team have almost built a new business and they (to enter into another old controversy!) deserve their bonuses. Whether they should have been paid by the Company or the founder/vending shareholders is a different matter.
"LSE:BET:Betfair's rally since July last year has been nothing short of meteoric. In that time, the share price has more than doubled, despite new UK tax rules on gambling, and now the internet betting exchange has smashed third-quarter profit ..."
Whilst I am pleased to see the apparently continuing improvement in the performance of Betfair and today's euphoria in the share price, I can't help but feel a little discomforted by the company's keeness to present EBITDA rather than earnings as its measure of success. I note that there is no mention of earnings projections in the press release I have seen today, just EBITDA. I had to go to page 21 of the 2014 Annual Report to find that earnings in 2014 were £51M, yet underlying EBITDA of £91.1M was presented in big headlines on page 1. It is clear that the company wants investors to see EBITDA rather than earnings. I would note that the magazine, Forbes, describes EBITDA as " a fairy tale told to investors and credit managers so that they go to sleep happy instead of running for the hills.". Now I am not suggesting that Betfair is doing this but I would suggest that in the interest of transparency, it should at least give equal emphasis to its earnings figures.
"Taking advantage of the World Cup gave a big boost to LSE:BET:Betfair's first-quarter, generating another period of impressive growth. But the share price has rocketed recently and the betting exchange trades at a big premium to peers. Tough ..."
"Having just been accused of violating accounting rules, the forgiving folk in the Square Mile have been won over by LSE:BET:Betfair's record quarter, fuelled by a flurry of bets on the World Cup in Brazil. In fact, the shares have been chased to ..."
"Gaming software developer LSE:PTEC:Playtech's first-half earnings jumped 13% to â¬78.9 million (Â£67.5 million), compared with â¬69.8 million in the previous year. Total revenues rose 15% to â¬176.8 million, while underlying adjusted net profit was ..."
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