![\"\"](\"https:\/\/www.betangel.com\/blog_wp\/wp-content\/uploads\/2011\/05\/110526-Betfair-share-price-600x495.png\" "\\"110526")
<\/p>\nWhen Betfair floated I got some stick for saying they were overvalued and they were not a buy. This wasn’t a statement on Betfair’s business or business model, more the price it was selling at.<\/p>\n
I first started taking an interest in the stock market in the mid 80’s and five or so years later I started investing. One thing I learnt is that if a company IPO’s and sells some of it’s stock it will do so at the highest possible price. This usually represents poor value for people buying immediately after the IPO. In Betfair’s case there was selling pressure as well as employee share options, that people had held for a very long period of time, suddenly could be cashed in. This behaviour was self re-inforcing, because if the price fell people were more likely to find a way to hedge their hard earned paper profits. If the price had risen sharply then that selling pressure wouldn’t have existed.<\/p>\n
Of course the market can overshoot in both directions so as the price falls, just like a loaf of bread in the supermarket, as the price gets lower it gets better value. Eventually the selling will stop and it will find it’s true floor. But for now you can pick up the worlds largest betting exchange at half price. Is it value? I’ll have to run the numbers again to answer that question, but it’s much better value than it was post flotation for sure. I will be interested to see the next set of results.<\/p>\n
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