French lottery and sports betting operator Francaise des Jeux (FDJ) recently made its debut on the stock market, and within minutes of its listing, the new title rose to 22.96 Euros, which represents a 17.77% increase. Shares peaked at 23.10 Euros by 10:35am.
The approval of FDJ’s registration document by market regulator AMF was the first step in the betting operator’s privatisation through a planned listing in Paris. The stock offering is said to be part of President Macron’s efforts to reduce the state’s debt and finance innovative industries. The government began laying the groundwork in 2018 to lower its ownership not only in FDJ, but also in airport operator Aeroports de Paris SA.
FDJ Chief Executive Officer Stephane Pallez said in a statement: “This privatisation project opens a new chapter in the company’s history.” The statement furthers states that completion of the listing is subject to AMF’s approval of the prospectus as well as to “favorable market conditions.”
FDJ had a revenue of €1.8 billion in 2018, and a profit of €170 million. It traces its roots back to a national lottery created in 1933 to help soldiers who were injured in World War I. Banks that worked on the IPO in September expected the company to be valued at €3.5 billion. This means selling half of the stock would bring in €1.5 billion or more. If that’s the case, it would be the biggest French IPO since fund manager Amundi’s €1.67 billion offering in 2015.
The shares were initially offered to institutional investors at €19.90 and to retail investors at €19.50, and when the market opened, they were valued at €23 each. The price did drop slightly to €22.60 by 11:44am. More than 5,000 retail buyers placed orders, and relative to the offer price, the shares were up 16.6%, thereby outperforming the French stock market, where the blue chip CAC 40 index .FCHI is down 0.7%.
This has led the executive to increase their share from 33.33% to 40%. For its part, the government has decided to reduce the state’s stake in the betting operator’s capital from 72% to about 20%. Minister of Economy Bruno Le Maire said that the privatisation of the French Games, IPO is a “huge popular success” that “marks the reconciliation of the French economy and markets.”
This is said to be the most high-profile French privatisation of the year. As such, it is seen as a potential catalyst that could embolden the French government to move ahead with other asset sales. It has, in fact, already been reported that President Macron’s government plans to sell government shares in certain businesses in order to raise funds for innovation projects as well as to boost the country’s overall economy.
The FDJ flotation is one of the biggest to take place in Europe this year, and it comes after the cancellation or postponement of a number of other initial public offerings due to investor jitters caused by Britain’s exit from the European Union as well as the simmering U.S.-Chinese trade war.
When the €380 million payment, which FDJ needs to make to the state to retain its monopoly rights over lottery and sports betting, is included, the privatisation is expected to generate €2 billion in proceeds for the state budget.