For my finance coursework we had to analyse a IPO transaction from the last twelve months. This was one of my favourite assignments to date as Betfair is such an interesting company with a fascinating finance history.
In the early days of online betting exchange market, there were two major players: Betfair and Flutter. Flutter was first to market, raising ~£28m VC funding in two rounds, one before product launch and one just after product launch in May 2000. Once Flutter had raised these two rounds the Betfair founders found that other VCs were unwilling to back a second competitor. Betfair instead raised ~£1.2m in incremental angel financing from friends and family. Despite significantly less capital, the Betfair team built the right product and got quicker user adoption than Flutter. The two companies merged about a year and a half after launch, combining user bases and bringing ~£12.3m of unused Flutter capital into Betfair.
Betfair floated on 22st October 2010 at an issue price of 1,300p, raising £211 million which valued the company at £1.4 billion. On the first day of trading the stock soared 19% but since then the performance has almost halved.
My report covers:
- The Betfair business
- The global gaming and betting market
- Unique business value drivers
- Financing history
- Key operating characteristics
- The IPO issue
- IPO rationale
- Exit for investors
- International expansion
- Expand product line
- What the IPO issued at the right time?
- IPO issue price
- IPO rationale
- IPO performance
- Day 1 share price
- Day 1 distribution
- Aftermarket performance
- Lessons learned
- Appendix 1: Fair value calculation
- Appendix 2: Financial calculations