Place Your Bets

I used to play online poker quite a lot. Actually there are a lot of similarities between trading/investing and poker. You have to maintain your capital, there’s a cost of being in the game and if you’re going to win you have to try to take a stand with something which has a good chance of succeeding. Ok there’s no bluffing in the markets, unless you’re a big player and can manipulate stock prices, but by and large it’s very similar.

I stopped playing online because I like to see people’s body language if they might be bluffing, so I only play IRL these days. Back in the mid noughties though, the tables were awash with Americans. The conversation was banal to say the least. Everything was “wow!” and everyone else was an “a$$” spelt like that because there was an expletive filter. Needless to say, English swear words were not in the filter, so all us Brits would call the other players “wankers”, and the introduction of a new word, increasing the table vocabulary by about 16%, was a shock to many and responded to by “wow!”

Soon after I stopped playing online, the whole landscape changed. The Yanks wanted to be protectionist of their gambling industry and set about ring-fencing the US from internet gambling they couldn’t control. 2006 saw BetonSports CEO David Carruthers arrested at Dallas Fort Worth airport, followed weeks later by the arrest of Sporting Bet plc’s Chairman Peter Dicks at JFK. These arrests related to “illegal internet gambling”, and ultimately destroyed the share price of Sporting Bet, as you can see from the chart. It has not recovered. Carruthers had a rough ride involving 24-hour house arrest and a jail sentence which he completed here in the UK. Online gambling companies here in Europe paid vast sums to the US for non-prosecution, Sporting Bet paid $33m and took a write-down of £252m after selling their US operation for peanuts. Partygaming paid £105m for non-prosecution.

My ‘chip leader’ though, is Betfair plc, the betting exchange. If you look at the stock exchanges like the LSE (see chart) and ICE, they are doing very well. Betfair is almost embryonic compared to them. A great looking chart. If they don’t get legislated against then they could be a runner. I’d do more than limp in, I’d pay to see a flop.

Betfair revenue is about £450m for the current year. Gross over the counter sports betting in the UK is reckoned to be around £1.3b according to Statista.com, so the upside potential for Betfair is immense.