Betting on companies’ financial futures should be outlawed

Tom Dalrymple.jpg

Not totally of course – I’m not advocating the repeal of capitalism. But the sort of thing that has infuriated Tom Dalrymple, the chairman of Scottish airline flyglobespan, should be. What he’s complaining about is bookmakers offering odds on a company’s collapse.That’s altogether different from the stock market. Whatever else about the market, it does represent the wisdom (or lack of it) of crowds, and it does require a serious stake for anyone to be a player. And the costs of getting it wrong are, as a result, significant. (Like anyone needs telling this week!)

Furthermore, having your well-being speculated about is part of the price of accessing investors’ funds when you float your company. Nobody’s making you do that.

Public betting on the demise of a company is a different question altogether. The entry fee for the punters is close to negligible but, more importantly, there is no cost to the bookmaker of issuing odds.

The mere act of issuing odds, however, is potentially lethal to the company named. Typically a small airline finally dies when suppliers pull the plugs on fuel, handling, or air traffic control. Sometimes they do that for non-payment of bills, and sometimes they just demand cash because of market rumours. Not everyone has that cash and then the game is up.

The actions of Paddy Powers in taking cheap bets on which airline is likely to go bust next carry a substantial risk of being self-fulfilling. Corporate failure is not a trivial matter. It wrecks livelihoods and destroys commercial value. Betting on it should be banned.

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