u’s original contract runs until October 2012, however the CEO, who has presided over a business that has seen its share price plummet 47% since it listed in October last year, said he would not renew his agreement and leave earlier. A Betfair spokesman said he would remain in place for "as long as the board want him" and that he would assist in recruiting his successor. Betfair's first set of annual results since flotation will be announced on Wednesday with Yu and Morana presenting the numbers to analysts.
James Hollins, analyst at Evolution Securities, called Yu’s decision to step down “not unexpected” and that it would likely be “taken as a positive” in the investment community given the share price performance since float and “increasing market concerns over strategy and leadership”.
In an official statement David Yu, said Betfair had decided to announce his departure now in order to “actively and transparently begin the process” of finding his replacement. He added he would remain “committed to delivering the best for our people and our shareholders and will give the board all possible support during the succession process so we can find a great, new CEO to steer Betfair through its next phase of growth.”
The dramatic drop in its share price has come following a lack of success in some of its new products, including financial trading site LMAX, as well as a number of unfavourable regulatory changes in Europe that have affected the entire sector, but particularly the exchange model. Earlier this month, for example, Betfair filed a complaint with the European Commission over the ban on betting exchanges contained within the Greek draft egaming law. Martin Cruddace, Betfair’s chief legal and regulatory officer, at the time said he was “disappointed with the inclusion of elements within it [Greek gaming law] which unfairly discriminate against Betfair and are clearly incompatible with EU law.”
Issuing a neutral stance on the stock following last November’s sell recommendation, Hollins warned Betfair’s annual results were likely to highlight “uninspiring revenues”, a lack of initial success for LMAX, and that European regulatory issues would remain a “big negative” for both the sector and Betfair, particularly relating to Germany.
However, he added Betfair’s valuation had come into “sensible parameters” since its flotation and, with a new CEO he estimated an unchanged target price of 950p reflecting the “strengths of its UK business, as well as the group’s potential in the US”.
Yu, who is in his early forties and earns around £500,000 a year, joined Betfair as chief technology officer in 2001 and as CEO in January 2006. At the time an industry insider told eGaming Review that he questioned Yu’s experience, suggesting he was "not a marketeer and not a financial guy". "Yu has tremendous qualities, but he hasn't run a company before," added the source. Betfair postponed a stock market flotation just months beforehand.
Betfair co-founder Andrew Black last year told eGaming Review that Yu had introduced an “American internet mindset that was lacking in the early stages of the business”. “He has taken the company and given it real scope and shape. He’s corporatised it in a slightly American way, although I think he’s very sympathetic to the cultural differences over here,” he added.
Since the company listed on the London stock exchange a number of senior executives have left the business. Robin Osmond, the first CEO of its financial betting exchange start-up LMAX, resigned just five months after the platform was launched to retail investors, while Mathias Entenmann, Betfair’s chief products and services officer and former UK managing director of exchange, who joined the exchange in January 2007, Tim Phillips, director of European and public affairs, and Charlie Palmer, head of mobile, left in April and May respectively.
Last month, however, the exchange moved quickly to add new faces to its senior team with Raj Vemulapalli arriving from Yahoo as vice president of mobile engineering, Ian Chuter joining from William Hill in the newly created role of group operations director, and Michael Bischoff named as the exchange’s new director of information services.