Betfair’s IPO soars as investors embrace social gaming

The world’s largest online betting exchange, Betfair Group, soared close to 20 percent in its first day of trading on the London Stock Exchange closing at £15.50 per share and raising $322 million during the session.

That closing price put it in the top three largest IPOs in the United Kingdom since Max Property gained 30 percent during its IPO in 2009.

The British company, which allows bettors to skip going through a bookie to make bets or give odds on everything from soccer to horseracing online, wound up selling 16.2 million shares at £13 each. It had said on Oct. 7 it would issue stakes to public investors at £11 to £14, or $17.50 to $22.30, a share.

Betfair had priced its IPO at $2.4 billion, and it kept to the high end of that estimate when offering shares conditionally on the LSE today. The firm spiked right out of the gate, gaining close to 20 percent to £15.65  per share within the first hour of trading.

The company will begin official trading on Oct. 27.

The IPO was vastly oversubscribed, which is likely music to the ears of Betfair’s largest initial backers. Under the terms of the firm’s overallotment option, the biggest stakeholders in the company could sell a further 1.8 million shares within 30 days, grabbing even larger gains if the gambling site’s share price continues to rise.

Betfair was founded a decade ago by JP Morgan trader Edward Wray, well-known professional gambler Andrew Black (both pictured above), and Internet entrepreneur Josh Hannah. Hannah left the company in 2004 and is now a venture capitalist at Matrix Partners in Silicon Valley.

Reuters estimated that today’s session will net Wray around £16.6 million if an overallotment option is exercised, while Black could rake in £18.9 million.

“Betfair and its management team are delighted that the company has successfully completed its IPO and has now become a listed company,” said Betfair’s CEO David Yu, in a statement. “ We believe we have many opportunities to grow our leading position in the online sports betting and gaming market.”

Right now, Betfair’s closest competitor is the recent merger of online Austrian gambling site bwin with PartyGaming, a marriage that will create the world’s largest listed Internet gambling company worth around $3.3 billion.

But Europe’s largest venture capital firm, and one of Betfair’s earliest investors in 2000, Balderton Capital, said today that it had no doubt the online betting site will continue to take all comers as it wades into public waters.

“Balderton Capital backs companies and entrepreneurs with a sustainable competitive edge and Betfair is a perfect example of this,” said Tim Bunting, a Balderton Capital partner.

Morgan Stanley and Goldman Sachs Group oversaw Betfair’s IPO in conjunction with Barclays and Numis Securities.

Renaissance Capital estimated $23 billion was raised in global IPO market this week, making it the busiest this year since July.