It’s not very often that you hear a tech CEO say “we just lost £1 million” and they’re not worried about it. But when the CEO in question is Richard Flint of Sky Bet and it’s a few hours after Donald Trump’s surprise US election victory, it makes sense.
With an estimated valuation upwards of £1 billion, Leeds-based Sky Bet is keen to be acknowledged as a unicorn. Valued at £800 million in 2015, the company grew 36 percent that year and another 50 percent this year. So, while he has no formal valuation to draw on, Flint is confident it’s passed the magical £1 billion figure to join the UK’s unicorn club.
Sky Bet (or Sky Betting & Gaming, to give it its full name) has its roots in the late 1990s and a collection of online sports products under the Sports Internet Group umbrella. In 2000, broadcaster BSkyB bought the group’s betting arm, Surrey Sports. It was rebranded as Sky Bet two years later.
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Non-core, you know the score
The early days were all about betting on sports via TV remote controls. Interactive TV tech in general proved to be unappealing to the masses, so in 2008 the business refocused on betting via the web. Using Sky’s brand to stand out in a competitive market, the company grew and turned a profit every year since then.
And yet life wasn’t perfect within Sky. “We’d become too big to be ignored, but too non-core to be properly understood,” says Flint, who has run the company since 2006. The volatility of a gambling business that regularly has to pay out huge amounts of cash didn’t gel with Sky’s core customer subscription model. When you’re a big betting company, payouts can sometimes be huge. Sky Bet had to pay £4.7 million to customers when Leicester won the Premier League, for example.
Flint says the company struggled to get the investment and resources it needed within the broadcaster’s enormous operation. “We’d slip down the list of priorities because we weren’t really core. Having days where we lost millions of pounds (in payouts), as the business got bigger, became less a sustainable situation.”
Flying the nest
So in 2015, Sky Betting & Gaming went independent again in a private equity deal with CVC Capital Partners. As a standalone company, it can grow on its own terms. It has the competitive advantage of being able to use a brand well known in key markets across Europe, as Sky retains a 20 percent stake in the business.
Now employing 1,200 people in Leeds and Sheffield, Sky Betting & Gaming offers a range of mobile gambling apps and websites focused on sports and casino-style games. The main Sky Bet app handles as many as 100 bets per second during peak times.
Flint says Leeds is a good place for a technology company and that it has a lot of the ingredients of a successful digital city set out in hit book The Flat White Economy. These include good connectivity and transport links, and a talent pipeline from local universities.
While the company would have access to more talent if it was based in London, Flint is happy in Yorkshire. “I’d rather take time to recruit a skilled team that are then loyal to you than have people go off to other roles. We have people who are committed to the company, and in return we’re committed to them with lots of opportunities, social activities and a flat structure.”
One thing Flint wishes Leeds had is better transport links with Manchester, so he could attract more staff from across the Pennines. The company’s 100-strong Sheffield office was set up to access a wider pool of talent, while being close enough (around 30 miles) to make in-person meetings easy.
To the future
Sky Bet is starting to venture beyond UK shores. It launched in Italy last week and a German roll-out will follow. It’s no coincidence that Sky has TV operations in both countries, and Flint sees these markets as big opportunities to further grow the company. More broadly, he still sees potential in converting betting shop diehards into digital customers.
Considering the company’s private equity backers, it’s no surprise that an IPO or private sale is on the cards for the future, although there’s no timeline for those plans. “It depends on our own growth, but also on the markets.”
Flint pauses for a second to consider the market turmoil that day, as the world gets used to the idea of President Trump. “I wouldn’t want to be doing an IPO today,” he chuckles.
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Financial markets have been rocked this week by a battle initiated by ordinary people against those who are usually dubbed market manipulators - hedge funds.
This is not being fought on trading floors but online and is a consequence of an explosion in the popularity of amateur share trading by armchair investors and collaboration among them.
Here, Sky News explains what has happened to rattle market regulators, hedge fund short-sellers and even the providers of the zero-commission online trading platforms people are using.
How did this come to light?
Unusual market activity was first linked to a surge in the share price of GameStop.
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The reason why is that, this is a struggling US retailer that has been closing stores at pace over the past few years because of weak trading and the company had said nothing to indicate a sudden shift in its fortunes.
Shares, which had been trading at under $20 a pop, were suddenly hitting values around $350.
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While it is down on earlier peaks, there remains high volatility over its market value.
Who was behind the value explosion?
Here is where the army of amateur investors enters the stage.
The stay-at-home message demanded of people during the coronavirus crisis, coupled with rock bottom interest rates, has inspired millions to seek out new ways to make their money work better for them.
It has seen the likes of online trading platforms such as Robinhood and Trading212 become immensely popular.
What users have been doing is collaborating on social media platforms, including Reddit, to conspire against the activities of hedge funds by using traded options, a product giving the holder the right to buy an asset at a fixed price.
The surge in price has been exacerbated by automated algorithmic trading, which can be triggered on big price shifts to cover a professional trader's position.
What are hedge funds and why have they lost out?
These market participants are described as accurate forecasters of stock market returns by academics and market manipulators by critics.
The companies engage in a practice known as short-selling.
Short-sellers borrow shares and immediately sell them, betting the price will drop before they buy back the shares and return them, pocketing the difference.
The GameStop stock was heavily shorted so when the price rose, the traders lost their bets and faced losses.
Does it matter that hedge funds have suffered so badly?
No. Unless you are a hedge fund manager.
The concern here among regulators is abnormal functioning of markets, usually based on information, becoming a risk to financial systems through disinformation and muddied motives of social media chatroom users.
The wallstreetbets board on Reddit alone has over four million members.
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What are the other implications?
The activism is clearly spreading.
While dozens of other heavily-shorted stocks have been targeted there are clearly elements of the activist community intent on bringing down hedge funds - with death threats even reported.
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On the other hand, commentators and notable US politicians, including Republican senator Ted Cruz, are suggesting that many are just playing Wall Street at its own game.
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Mr Cruz accused Robinhood of keeping out the 'little guy' when it implemented a trading freeze.
How are the trading platforms now suffering?
The likes of Robinhood may have benefited from surging customer numbers by the day but the trading frenzy has created its own problems.
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Many, such as Trading212 on Thursday, have had to suspend new customer applications and stop users buying more shares in companies including GameStop to the fury of investors.
Platform outages have been widespread and the New York Times reported on Friday that Robinhood had had to raise more than $1bn in emergency funding to prevent further limits on customer trades.
In short, they are a victim of their own popularity.