Empire Raises $34 Million in Float

21 June 2005

While talk in the I-gaming industry regarding floats and IPOs centered on Party Gaming within the last month, it was another online poker room operator, Empire Online Limited, which floated last week.

The company, which operates Empire Poker.com (among the largest online poker rooms), saw its shares drop nearly 15 percent as a slough of negative media stories were published throughout Europe focusing on the future float of Party Gaming, which operates the world's largest online poker room Party Poker.com.

In addition to operating its own site, Empire Online has a large network of affiliate sites, which on the surface are different poker rooms, but all tie into the same backend of Empire.

Empire also operates a white label casino site that is tied into the 888.com network (Casino On Net) of sites, the company said.

During its first day of trading on the AIM (Alternative Investment Market) exchange of the London Stock Exchange, shares for Empire rose 8 percent from the initial placing of 175p per share.

With much of the consumer base for online poker coming from the U.S. a series of stories ran in the UK and European press questioning the legality of the activity in the U.S. The stories questioned whether or not Party Gaming would even able to go public with such a heavy reliance on the U.S. marketplace.

Rumors were also circulating throughout the investment community that the valuation of Party Poker had been cut by $1 billion as investors demanded a price discount on the shares for the risk they were taking in buying the company.

The news had a ripple effect on Empire as its price dipped to 149p from the initial listing, costing the company more than £70 million.

Even with the dip in price share, Empire was able to raise more than $222 million through its listing. The majority of the money was used to buy shares from its founding members.

After the completion of the float Empire was able to net nearly $34 million, which it intends to use to finance a major European marketing campaign, according to its chief executive Noam Lanir.

The company also said it would consider using its new capital for mergers and acquisitions as it continues to expand its global reach.

"The placing and flotation on the alternative Investment Market of the London Stock Exchange will enable us to consolidate and build on our rapid growth," Lanir said.

Possible acquisitions could include software and technology firms that run other casino and poker sites.

The company said Empire Poker had 91,549 active real-money poker players as of March 2005, from a total of 144,000 players recruited since the launch of its site in November 2002. The poker site is growing at a faster rate than the firm's casino sites, with growth of 166 percent compared with the same period in 2004.

Although the firm's white-label casinos had a total of 30,093 active real-money players, they represented just 23 percent of the group's revenue - down from 33 percent for the year ending December 2004.

In financial statement released in conjunction with the float, Empire said it recorded a pre-tax profit of $37.7 million for the year ending December 2004, on turnover of $65.2 million.

First quarter profits for 2005 were $12.4 million, the company said. For Empire the $34 million of new capital generated from the float is only 15 percent of the money raised, with its shareholders selling shares of $189 million. The influx of capital does increase the company's cash reserve to more than $45 million.

An Israeli founded Empire Online, and it is widely assumed that most of its shareholders are Israelis or expatriate Israelis, but it is not registered in Israel, has no offices in Israel.

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