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BetDrift - Betfair is all at sea
The extent of Betfair's fall from grace was epitomised when Numis Securities' Ivor Jones recently proposed that the company should merge with the online bookmaker Sportingbet. The deal, would, Jones said, give Betfair "the first-class fixed-odds bookmaking product which it needs to round out its product depth and avoid a lengthy, expensive and risky process of building it internally".It has been a bad year for Betfair, the once high flying betting exchange. The biggest disaster by far, being the dismal performance of the company's share price, since the company's flotation in London on Friday 22 October 2010. During the course of that day, shares in Betfair recorded an intra-day high of £16.09, before closing back at £15.50. This morning shares in the company were trading at an all time low of 718.50p (well over 50% off the alltime highs).
The year has seen Betfair excluded from a number of key European markets, such as France, Spain (delayed) and Greece, whilst also encountering some problems with its licence in Italy.
A succession of the company's high profile television ads were banned by the Advertsing Standards Authority, whilst its online casino was blacklisted by the leading industry website Casinomeister, where it still lingers in the "Rogue Section." Betfair's poker division, once famous for the hushed up "poker heist" was forced to migrate to another company's network; and the Observer recently reported that the company had experienced a large exodus of key staff.
At the exchange level the company's horse racing product, which once had the bookmakers running scared, is now devoid of liquidity in the mornings, and more often than not, it seems to take its lead from the on-course betting market.
Negative vibes continue to surround the company's fledgling LMAX trading platform, with the rumour mill suggesting that most of the liquidity on the site is still provided by its main backers.
There are many reasons as to why Betfair has taken on the mantle of a rudderless ship. For many punters, its betting exchange simply remains too complicated. Then there is the notion that the exchange is a shark infested pit; with small punters likely to be eaten up by professionals, who may perhaps be trading on the back of insider information.
Mark Davies' exodus from the company was a serious mistake, as he was the only person capable of projecting the bold revolutionary spirit that epotomised Betfair in its early days. Davies took the war to the bookmakers and was quick to highlight issues such as the integrity of the exchange product, whenever an owner, jockey or trader was involved in a case of insider dealing on the exchange. Davies is gone, and in his wake we find a large black hole and a muted silence.
There are many who believe that under the stewardship of David Yu, Betfair has become too fixated with technology and with the holy grail of cracking the US market. Allegations also abound that the senior management at the company are both arrogant and blinkered, and do not know the slightest thing about the market that their company operates in.
With results due at the end of June, bad news for the company's LMAX platform, may well see Yu being the next one out the door.
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