Betfair completes sale of stake to Softbank
The weekend press (Sunday Times, Telegraph) reported on the acquisition of 23% of Betfair by the Japanese firm Softbank, a deal that was initially announced at the beginning of March. The Times article questions the valuation (67x 2005 earnings but 30x forecast 2006 earnings) :
At just over £300m, the investment values Betfair at about £1.5 billion — 30 times 2006’s projected earnings and 67 times last year’s operating profit. Multiples like that remind City analysts of the dotcom boom of 2000. But in Betfair’s case, its supporters argue, the rating is justified…
…The sceptics accept that the Betfair model has revolutionised gambling, but many doubt that its premium rating is justified. “Betfair’s growth has been phenomenal, but it no longer has the market to itself,” said one analyst. “Things could get a lot tougher.”
I think it is interesting to compare this with the valuation multiples observed in the world of financial exchanges. If you recall, I posted a great graph (by Morgan Stanley via the Economist) on this subject a couple weeks ago. Here it is again:
Without knowing the exact numbers, at 30x forecast 2007 earnings (if the Times report is correct), it would seem that Betfair would fall more or less in line with this universe. It will be interesting to calibrate as and when they disclose their growth figures.
