Betfair listing hits controversy
High rolling Betfair clients are to face an investigation by the Inland Revenue according to The Daily Telegraph (25 September 2010). Bad luck when the company is listing this year.

All exchanges survive on liquidity and during these rather bleak recessionary times that liquidity has to be provided by major layers. They used to be major racecourse bookmakers who have specialist knowledge of the UK’ horse race betting market but with the expansion of betting on other sports further knowledgeable layers were sought. 

The big players, GBGC is told, are based offshore which will make it all the harder for the UK’ Revenue and Customs to track down unpaid tax unless of course Betfair can be persuaded to make a deduction at source.
The UK’ off course betting industry used to maintain that the Betfair model under the 1963 Act was illegal because punters were introduced to layers who were not licensed. If the same happened in a pub the layer would have been arrested. The Labour Government, however, was content to turn a blind eye to the practice, after all it was a populist pastime and this was a populist government. 
The circle was squared with the 2005 Gambling Act where exchange betting is covered off in detail.
The question with any listing is where is the growth? There are high expectations for the US regulating Internet gambling but sports betting is not under consideration in the current federal bills. California, however, is on the path to approving exchange betting on horse racing but the state’ racing wagering has been in steady decline. France has stated that they will not allow exchange betting any time soon.
The trend for imposing a betting taxing based on turnover makes it difficult for betting exchanges to succeed with its commission based business model.
The shares are likely to pay an attractive dividend to compensate investors for limited growth prospects. 
The influential magazine Money Week is more emphatic. In an online newsletter to subscribers David Stephenson the Associate Editor says:
Why you should avoid Betfair
“At the moment, the issue details are rather sparse. We don’t know the IPO price or even the timetable of events. So it’s hard to take a proper investment view on the stock.
However, the chances are that the market value will be high enough – figures like £700m are being bandied around – for the bookie to jump straight into the FTSE 250 index.
Clearly, that could attract lots of private interest, not least from Betfair clients. But private individuals aren’t being allowed in on the float.
“While large institutions will get to buy in, we’ll have to wait for the share to start trading before we can place our bets”, says Simon English in the Evening Standard.
Betfair is clearly very different to Ocado – it makes money for one thing. But even based on last year’s £39m net profit, a £700m market cap would imply a p/e ratio of around 18. That compares with spread betting rival IG Index on a sub-15 current year multiple. That would be too pricey to get me buying.”