Jeffrey Walkenhorst

Youbet.com: Rising Share Price for Churchill Downs Implies More Value

Hi GP44 -
I posted a brief bit on my blog -

Wacky Trading Offers Merger Arbitrage Opportunity in Youbet.com

commonstocksense.blogs...

Other stocks were also off late in the day -- one other notable example: FLWS.

Youbet.com: Growth Potential and Cash, Cash, Cash

CHDN is trading near/at all-time low on various valuation metrics (i.e. multiples of earnings and cash flow). If we assume CHDN is solid, durable franchise, the stock will once again trade at historic multiples at some point. On this basis, CHDN is really worth $45-50 per share which puts UBET's value at $3.70-4.00 per share. CHDN was in the high $30s just a few weeks ago. Also, note that CHDN pays a $0.50 per share annual dividend, which I expect the company can maintain even after issuing more shares to UBET shareholders.

Blue Nile: Trading on Thin Air

Hi Roger, this has long been the "call" on NILE / BIDZ -- while I believe the valuation differential will/should indeed narrow over time, the question remains timing. Investor euphoria for NILE may yet propel the stock upward, churning the stomachs and testing the patience of those with a short position. Of course, euphoria for any name can change quickly and sharply, and -- like John Neff would say -- usually smart for longs to oblige Market euphoria and sell into strength (in this case, as insiders are doing). Will be interesting to see what happens.
JW

Time to Wager on Youbet.com

Hello Philip, I included brief mention of key competitors in discussion of risk factors:

"The ADW market is dominated by four major players: Youbet, Churchill Downs, Television Games Network (TVG, recently acquired by UK’s BetFair), and XpressBet (Magna Entertainment, which is currently in Chapter 11 bankruptcy proceedings)."

Here's a little more information: ADW wagers historically have been processed through a "hub" in Oregon (the "ORC" - racing.oregon.gov/RACI...), which reports quarterly handle figures for a number of online companies that use the hub. However, Youbet began processing some handle outside of Oregon in the second half of last year. Prior to 2008, I believe Youbet's market share was usually 30-35% of all wagers processed through Oregon, putting the company in the number one position. The ORC recently reported 2009 figures -- info on ORC site or in this article: www.bloodhorse.com/hor...

Using the figures for the other "big three" per ORC and reported by Youbet, market share looks like this (*assuming others still process all wagers through Oregon):
Handle ($Ms) Share
Youbet.com youbet.com 438.26 29%
TVG.com tvg.com 503.00 34%
Magna xpressbet.com 206.03 14%
Churchill Downs twinspires.com 241.03 16%
Subtotal 1,388.32
Others 106.09 7%
Total 2008 1,494.42 100%

Youbet's handle was depressed in 2008 for industry reasons noted in my article (although recall that net revenue was flat Y/Y even with lower handle). Based on new contract agreements for 2009 and management commentary, handle should rebound to north of $500 million, leading to higher market share. Two other points: (1) "Others" at 7% is quite small, revealing that scale, brand, platform, etc. are all critical to succeeding in this business, and (2) Churchill Downs first tried to "go it alone" in the online space by launching twinspires.com, but shortly thereafter purchased Ameritab/Winticket.com to more easily/quickly scale the business (although 2008's 16% share was still much smaller than that of Youbet's 29%) -- for more info, please see:

thoroughbredtimes.com/...

Hope this helps,
Jeffrey




On Mar 23 06:17 PM Philip Obal wrote:

> Good article, but I did not see who UBET's competition is? How many
> and exactly who?
>
> Very good article and information.