Outlook
PartyGaming was the biggest of a slew of online betting sites that floated on the London stock market four or five years back. What made these IPOs odd, to put it mildly, was that they were based on a largely illegal activity – namely that online betting was against the law in its biggest market, the United States.
I exaggerate only a little, but it would scarcely have been more ridiculous had the Medellin drugs cartel tried to float on the LSE. Ridiculous maybe, but that didn't stop investors lapping them up. Predictably, the vendors and sponsors cleaned up, and once the US authorities decided to enforce the law, the investors lost their shirts.
Yesterday, PartyGaming settled all outstanding claims with the US Department of Justice by agreeing to pay a $105m fine. Unfortunately for the company, this doesn't allow it to resume taking bets in the United States, where online gaming remains illegal. But it does remove a big uncertainty, which ought in time to allow renewed access to equity and debt markets so the company can begin the process of consolidating this still-fragmented industry.
PartyGaming hopes it should also stand the company in good stead should the US decide to change the law and allow regulated online gaming.
This is not altogether impossible at some stage in the next few years. In the search for new sources of income, some of the big physical gaming groups in the US are dropping their objections to the genre. Some privately owned poker sites, such as Full Tilt Poker and PokerStars, still operate illegally in the US, and as a result have cleaned up in the online poker market.
But they take massive risks by doing so. Is a bright new future dawning for PartyGaming? Well, some sort of a future anyway. But it seems deeply unlikely this one-time FTSE 100 stock will ever again achieve the heroic valuation it was floated at when it still had the vast US market largely to itself. (Credit: The Independent)
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