To most punters, whether a betting company is publicly or privately owned isn’t of particular interest. As long as they offer good odds and pay out on time, the ownership details aren’t really of much interest. Yet it is something that savvy punters will pay attention to, not least of all because you can invest your own funds in a public companies and that’s a bet that might have a longer-term payout.
There are pros and cons to each approach, with a public company likely to find it easier to raise funds yet also being at the behest of shareholders. A private company, meanwhile, will find it harder to raise funds for something such as an expansion move but won’t have to answer to as many people when making decisions and moves. It’s an intriguing part of the business that not many people will have thought about.
What’s The Difference Between Public & Private
The first place to start is with a quick exploration of the difference between public and private companies. A private company is, as the name suggests, privately held. That means that the company is usually owned by its founders or the management team behind it, with private investors sometimes being involved. The key thing with a private company is that funds for growth must be raised from within.
This differs to a public company, which trades on the stock market and can increase funds by selling stocks or bonds. Stocks are basically a share of ownership in a company, whilst bonds are basically a loan taken from an investor that will have to be paid back with interest but doesn’t involve the surrounding of shares in the company. The dealings of private companies can remain private, those of public companies can’t.
Public companies can raise large amounts of capital for something such as an expansion into a new market by offering shares on the stock market, giving them capital to play with. The flip side of this is that a public company is liable to face more stringent controls from those involved than a private company would have to put up with. Private companies, meanwhile, are not allowed to offer shares to the public.
The Merits Of Being Public
Being a public company can have numerous benefits when it comes to the world of betting. One of the best examples of this became clear when it looked as though the sports betting market in the United States of America was going to open up, meaning that the share price of public betting companies well-positioned to take advantage of this went up significantly.
Market analysts believed that the US market would be worth four times more per year than the UK market up to 2023. This led to William Hill, GVC Holdings and Flutter Entertainment all seeing their share prices go up. This was of particular benefit to William Hill, whose shares had dropped to a five-year low in 2018 as a result of the government’s decision to install a maximum stake on Fixed Odds Betting Terminals.
The Downsides Of Being A Public Company
Whilst there are clear benefits to being a public company in terms of raising capital to make market moves, there are also downsides. One of the first ones that businesses need to consider is that it is an expensive thing to do initially. On top of that, going public means that a part of the company previously owned by those that setup the company will be sold to a stranger. This will result in a loss of control.
Decisions can not be made autonomously at a publicly held company. Minority shareholders will have a say in how companies are managed, including the makeup of the board of directors. There will also be an increase in regulation, given that companies need to meet certain criteria in order to be publicly listed. This includes an enhanced level of reporting on decisions being made on a whole host of issues.
Another major downturn for a public company is the fact that it is constantly having to think about the short-term. In 2018, for example, betting companies were hit with the government’s decision to reduce the maximum stake playable on FOBTs and an increase in the Point of Consumption tax, so public companies saw their stock value take a hit. Stock prices did not take into account the likelihood of future growth.
This can lead to short-term thinking that can lead to job loses, redundancy and other things that private companies are more robust at resisting. With public companies quarterly profits are the be all and end all of everything.
The Merits Of Being A Private Company
Having the details of every small move made by your company known to the public isn’t ideal. That is especially true in an industry where businesses tend to follow moves made by others for fear of missing out on a market or being left being. Being a private company affords those that opt for that route exactly what the name suggests: more privacy. There is no need to reveal financial results to the public, for instance.
Public companies have a need to satisfy the needs and demands of shareholders, which can often lead to short-term thinking. The same is not true of private companies, who can have much more of a long-term plan when it comes to growth. That doesn’t mean the short-term will be ignored, but it’s less relevant to big decisions. Private companies are authors of their own destinies, for better or worse.
The Downsides Of Being A Private Company
As you’ll no doubt have figured out by now, one of the main downsides of being a private company is that it’s much harder to raise funds for the likes of expansion or development. Yes, private and angel investors exist and will be willing to invest in a private company in return for something, but they’re not likely to simply hand over millions of pounds and then walk away without caring what their money is used for.
The other downside when it comes to private betting companies is that there is less public accountability. Private companies can do what they want and won’t really care what anyone thinks. The perfect example of this comes in the form of Bet365 founder Denise Coates taking home £323 million, or around £1.3 million per working day. The money was seen as ‘obscene’ by many but supporters point to the fact that at least she pays full income tax, at a much higher level than she would if she took dividends.
Public vs Private What Is Better?
If you look at the top 6 betting companies in terms of revenue only two are private, bet365 & Betfred, the rest are public (William Hill, GVC (Coral/Ladrbokes owners), Flutter/Stars (Paddy Power & Betfair owners) & 888 Holdings). The biggest difference is the public companies tend to own lots of brands under one holding company, which is something they can do as they can easily raise capital and support for acquisitions and mergers.
Bigger doesn’t necessarily mean better for the punter though. On balance private companies are more consistent in their approach, which as a user means you know what you are getting. Public companies chop and change all of the time based on profit, which is why you will notice the promotions available at the likes of Coral and Ladbrokes change a lot, as they only want to run good offers when they know they can make the most money. Public companies can change hands or be sold off to new owners, which can change the brand overnight for the user.