Things not looking so great for Betfair (BET-L)

By: ispeculatornew
Date posted: 05.09.2011 (5:00 am) | Write a Comment  (0 Comments)

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A few months ago, we did write about Betfair, the promising peer-to-peer gambling website that has been a rising star in Europe. That post generated a lot of comments and attention not only from people familiar with the company but also many others.

US Legislation Being Relaxed?

One of the more promising aspects of it was that it seemed like the US government was perhaps considering making life easier for these offshore gambling websites to operate within the US. It’s critical not only because the US is the biggest potential market (by far) but also because if it’s illegal for a company to operate in the US, I’m not entirely certain how the rules would apply to anyone investing in those same gambling companies.

Ironic

Not only was the US looking at fault after having lost a few court decisions regarding these bans in front of the International Court but it also seemed kind of ironic to have all of these websites such as PokerStars getting visilibity in the media, on tv, and everywhere. They were not promoting paid (and illegal) gambling but rather the free variety through their sister websites. Of course, once you are playing for free, they would certainly make life easy for you if you wanted to wager some real money. That would involve a few complicated steps to avoid US restrictions on money transfers to gambling websites. That being said, it was going on in front of everyone.

Then it stopped

On April 15th, eleven individuals including the founders of three of the largest poker websites ended up being charged while PokerStars, Full Tilt Poker and Absolute Poker were all closed. In the process, millions of players had their money frozen (with little to no recourse) and in a matter of hours, completely changing the online gambling landscape.

It’s not all that bad for Betfair

Betfair was one of the companies that has been very much compliant with US regulations making it very difficult to even log in from the United States. That has certainly turned out to be a great decision and you can imagine that if one day the US does open its markets, it will be much easier for a company like Betfair to do business in the country.

That being said

Betfair’s stock has been suffering because its growth has been stalled. Why? Because it is already a big player in the UK and all kind of regulatory issues make growth abroad much more tricky. Revenues are still increasing but not as quickly as we could hope. Revenues for 2008, 2009 and 2010 turned out to be 242.4M, 301.2M and 340.9M British Pounds with profits actually declining in 2010. I’m personally starting to think that these gambling stocks are becoming long term opportunities but it could take a long time depending on how US and other foreign legislators change their rules.

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