hairman Edward Wray and co-founder Andrew Black, who set up the peer-to-peer betting business in 1996, each plan to sell about 10 % of their holdings. They have a combined stake of 22.5%.
The pair are among a group of 14 major investors who between them own 75% of Betfair. More than half of them are expected to trim their stakes to allow new investors to purchase at least 10 % of the company. Japan's Softbank is the other major shareholder, with a 21.5 % stake.
A further 600 investors, together holding 25% of the company, will also be given the chance to sell shares at the float. The company, which has us$ 236.7 million cash and no debt, is not planning to raise any new money. There is no retail offer.
Betfair, which pulled a planned initial public offering in 2005, is believed to have been initially seeking a £1.5bn valuation. However, aspirations are thought to have been scaled back to about £1.2bn in a market spooked by poorly performing IPOs, including that of grocery delivery group Ocado.
CEO David Yu said the "valuation isn't the be-all or end-all for us", given that investors were retaining nearly all of their holdings. Apart from providing an exit for long-standing investors, Yu said the listing would give the company an acquisition currency for share-based deals in a consolidating betting market and accelerate the group's growth. "We are well known in the UK but in other jurisdictions a listing makes it much more practical to get a licence," he added.
Some analysts and industry rivals were surprised by the timing of the float in jumpy markets and off the back of lower profits than last year. Full-year figures released last week show a 31% fall in earnings before interest, tax, depreciation and amortisation to us$ 70 million in the year to April 30, when revenues rose 13 % to us$ 534.6 million. Pre-tax profits fell from us$ 74.4 million to us$ 27.9 million.
Stephen Morana, chief financial officer, said: "We haven't massaged the figures for the IPO" and pointed out that the lower numbers reflected a ramp-up in investment, ahead of the football World Cup and in its US business and the LMAX financial exchange. The latter is due to launch in the final quarter of this year.
Ralph Topping, the William Hill chief executive, said, however: "I was quite surprised by the profits fall, given the high multiple they want." Stirring an ongoing row between the traditional bookmakers and Betfair, he added: "We hope the fact that they are floating will force them to be more open about who is laying bets on their website. I'm looking forward to seeing them lift the kimono."
Paul Roy, chairman of the British Horseracing Authority, weighed into that debate, claiming that Betfair had "disrupted" racing's finances with "severe consequences". He added that some of its clients, who make "many thousands of transactions" a day, should be paying the levy to fund the sport.
Yu stressed that, like other bookmakers, Betfair gives 10 % of its gross profits broadly the commission it takes to fund horseracing. "The challenge for racing is that there are other opportunities for people to bet on," he said, noting that racing accounts for less than a third of Betfair wagers.