is it a good deal? What risks?

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FDJ action: is this a good deal? What risks?

ACTION FDJ – Individuals can now come forward to buy shares of the Française des Jeux, as part of its privatization and its upcoming stock market listing. Presented as a value of return, is the FDJ a good deal? We weigh the pros and the cons.

(Updated on November 08, 2019 at 9:31) Do you have to invest in French Games? Many individuals and small savers who ask the question after the opening of the subscription period Thursday, November 7 for the purchase of shares FDJ. They have indeed until Tuesday 19 November 2019 at 8 pm to position themselves with their banker or broker, and take advantage of the incentives put in place by the state. A discount of 2% is applied on the share price and one free share is granted for ten purchased, provided they are kept for at least eighteen months. Is it enough to qualify the FDJ shares for a good deal? Like any stock market investment, risks remain. We explain to you why the investment can be worth it and what can wait for you.

A value of return. This is how the company presents itself to potential future investors. "The FDJ is a company in a steady growth model (…) We are not a speculative value ", defended Stéphane Pallez, CEO of la Française des Jeux, at RTL in October. On his dedicated website, the operator puts into average growth of stakes of "5% per year for 25 years"Since 2000, they have more than doubled to reach 15.8 billion euros in 2018." This growth is expected to continue this year. 16.9 billion euros in bets in 2019 (+ 7% compared to 2018).

But in this case, how much should we expect if we buy FDJ shares? For the difficult time to say it with certainty, since the final price of the action has not yet been fixed (read below). "More than the share price, it is worth watching the dividends," said Philippe Crevel, director of the Circle of Savings at the Internaute.com. "Today, they are recurring, and the surplus value must be considered as a bonus". Several experts expect a yield between 3 and 6%.

They exist. If you are not used to markets, remember that, Like any stock market investment, the purchase of FDJ shares presents a risk. However, there are short-term and long-term risks. In the first case, the question is whether to invest now, during the purchase period? Many experts recommend being cautious. It is advisable to let pass several days, even several months. The goal is clear, see how the title is hosted on the stock market. The share price is likely to fluctuate very strongly.

Other data to consider: the French Games will have to pay 380 million euros before June 2020 to the state, in order to maintain its monopoly. The company will surely have to borrow, a decision which will weigh on its net result, and thus in fine, on the stock exchange. The experts we contacted are unanimous, individuals who are tempted by the purchase of FDJ shares must think long term and at all costs avoid "the stock market coup".

And the risks in the longer term? In the registration document, which is 382 pages long and approved by the Autorité des marchés financiers (AMF) – which you can consult here –French Games lists a series of risks, that you can find in chapter 3 from page 8. The operator believes that a change in the regulatory framework for example could harm him by "weighing constraints on its growth strategy" or "affect (its) capacity to recruit new players ". So how to limit capital risk? The experts we contacted recommend that diversify. Clearly, if you start, it is advisable to buy other actions, in addition to those of the Française des Jeux. If you want to know more, consult our dedicated file without delay.

As an individual, you have until Tuesday 19 November 2019 at 8 pm to manifest you. Attention, the schedules can be different, according to the intermediaries :

  • 17h (Paris time) : closing of the purchase period for orders at the counters.
  • From 17h to 19h, according to the intermediaries: closing of the purchase period for telephone orders.
  • 20h : closing of the purchase period for Internet orders.

The date of November 19th can evolve "according to the market conditions ", recalls the FDJ, because the final price has not yet been defined. if it is outside the announced range, then this date may be modified. The first listing is scheduled for Wednesday, November 20, 2019 at the Paris Bourse and announced for 9:30.

The Minister of Economy announced that the price of the action of the FDJ will be understood between € 16.50 and € 19.90. Attention, this is not the final price. In addition, you must bear in mind that the latter can quite be determined, Thursday, November 21, outside the range unveiled by Bruno Le Maire. Why ? The price of an action depends on many criteria (the value of the French Games estimated by the State, the share price of comparable companies, the supply and demand of FDJ shares, etc.). If so, then the offer period will be changed.

Asked about BFM Business, the CEO of the FDJ, Stéphane Pallez, said that the total valuation of the company will be between "3.150 and 3.8 billion" euros. To make the privatization of La Française des Jeux a popular success, the government is putting in place a number of incentives. Individuals benefit from a discount of 2% on the share price. It is also planned thata free share is granted for ten shares acquired"if the investor has kept his securities for at least 18 months". In the columns of Parisian, Bruno Le Maire said thata minimum subscription threshold of 200 euros has been set. Similarly, "free shares are capped at 5,000 euros of shares purchased".

Individuals will be able to turn to their usual financial intermediary (bank, credit institution, online broker or brokerage firm). You must be of French nationality, reside in France or be a national of a State belonging to the European Economic Area (EEA) – the 28 EU Member States as well as Iceland, Norway and Liechtenstein – to invest.

To buy FDJ shares, individuals must imperatively hold a securities account or stock savings plan (PEA) to be eligible to place a purchase order. Are you unsure about the product that best suits your needs? The PEA has a more advantageous tax system. The securities account allows you to buy shares of European companies, but also foreign ones. Check out our dedicated folder here to learn more.

When placing your purchase order, you must indicate to your bank interlocutor the price range you are willing to invest. In detail, three types of orders can be placed within the so-called Open Price Offer (OPO):

  • Order A1: priority order up to an amount of € 5,000;
  • Order A2: non-priority order above 5,000 euros;
  • Order B: non-priority order capped at 150,000 euros.

To place a purchase order, you must have a certain amount of information: the meaning of the operation (here the purchase), the name of the company that issues the shares (here the Française des Jeux), the mnemonic code or ISIN (right here FR0013451333), the market on which the share is listed (Euronext Paris – compartment A), the quantity of actions you want to buy and the period of validity of the order.

At the Assembly, not more than twenty amendments had been tabled to oppose it. The objective put forward by the Government is to support innovation and industry, by feeding a dedicated fund. "We need money for artificial intelligence, quantum computing, data storage, health of the 21st century," said the economy minister at a press conference on Thursday (November 7th).

The privatization of the Française des Jeux has been registered under the Pact Act, on the growth and transformation of businesses. This law was finally adopted by the Parliament in April, thus allowing the transfer of the majority of the capital, now 72% owned by the French State, to the private sector.. The state will however remain present in the capital of the company, up to 20%. In total, 99.32 million shares are placed on the market.

This operation could yield up to 1.9 billion euros to the state, during the IPO scheduled for Thursday, November 21. After privatization, the state will continue to pocket tax revenue estimated at 3.5 billion euros per year. The dividend, it will de facto decline since the participation of the State capital will drop to 20%. As an indication, the State received € 87 million in respect of the 2018 financial year. CEO Stéphane Pallez indicated that the next dividend paid to all shareholders this year will be € 122 million. "We will not pay shareholders the costs of privatization," she said.

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