France has its biggest IPO since 2005

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What's going on?

French lottery operator Francaise des Jeux held its initial public offering on Thursday, and it got lucky: its shares soared 14%.

What does this mean?

Until Thursday, the French government owned 70% of the lotto firm. But in an effort to raise some money to pay down the country’s debt, it decided to quit while it was ahead. The government sold 52% of the company and earned over $2 billion in the process – making this the biggest French IPO since 2005.

Investors seemed to like the look of the company’s profit growth, as well as its plan to pay 80% of its profit as a dividend next year. Its prospects for the future might be just the ticket too: there are hopes it’ll grow in Africa and online, as well as sell new services via its French retail networks.

Why should I care?

For markets: Fortunes turn on a dime.
Gambling is a risky business for investors, as firms’ success is dependent on regulation. But since the government still owns part of Francaise des Jeux, it’s in a stronger position than most. The same can’t be said for Britain’s William Hill: the gambling company reported a big revenue drop in its retail division on Thursday, which it blamed on new caps imposed on betting machines. Hill is shifting focus to online gambling as a result, but rumors earlier this month that online might also become more heavily regulated sent the company’s shares down 12%. It’ll pretending it’s a true-blue yank in no time, then: America’s relaxing its gambling regulations, expanding a market Hill’s already started to capture.

The bigger picture: Private doesn’t mean perfect.
A company recently sold off by the UK government saw its shares fall 14% on Thursday. Royal Mail, the British postal service, warned it might make a loss next year as it struggles to transform from a letter-deliverer to a parcel-deliverer. Analysts also blamed strong unions for its inability to modernize – a problem France famously struggles with too…

Originally posted as part of the Finimize daily email.

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