£6 Billion Lost
eFinancial News.com reports that the value of online gaming companies has collapsed by 51 percent from this year's highs. A combination of U.S. legislative efforts to abolish I-gaming, high- profile arrests of executives and a lack of confidence over the sustainability of the business model of online gambling companies has wiped more than £6 billion off the value of the big five listed companies.
The three companies with ongoing legal problems have suffered the worst. BetonSports, whose chief executive was arrested in the U.S. this summer, was down one-third before suspending its shares indefinitely, while Sportingbet, whose chairman was recently detained in the United States, dropped 58 percent. Finally, Austrian gaming company bwin, whose co-CEOs were arrested in France this month, has dropped more than 80 percent.
Meanwhile, PartyGaming is down a third from its high in May, while shares in 888.com have plummeted 47 percent from their peak this year.
Martin Oelbermann, an analyst at gambling consultancy MECN, said a combined crackdown on online gaming by authorities in the United States, France, Italy and Germany could do permanent damage to industry and warned companies not to go ahead with planned IPOs.
PokerStars has done just that; the company postponed its £1.6 billion IPO in July.
"I doubt any companies will go ahead with IPOs in the near future," a spokesman for Boston-based Fidelity said. "The U.S. legislation is too intimidating."
Will the 'Fish' Grow Bored of PartyPoker?
Analysts last week slashed PartyGaming's price target by 44 percent and branded its business model as flawed in the long term. Julian Easthope, an analyst with UBS, said that because of the dynamics of online poker, PartyGaming's revenues are likely to decline significantly in the future. His theory is based on the belief that a relatively small number of skilled players (so-called sharks), who make a living from the game, generate the majority of the company's revenue. The "sharks," he said, feed on the "fish," or new players with limited experience, who lose money and become bored with the game.
Easthope said that growth in online poker revenues requires continual increases in new customer introduction to retain the good players that drive revenues. But PartyGaming decided last year to exclude skins, such as Empire Online, which directed gambling traffic to its Web site, thus demonstrating loyalty is not a feature of its customer base.
Easthope also expressed concerns about growing advertising restrictions. He said customer acquisition will get more difficult and predicted that within a year PartyGaming will see lower growth in sign-ups, leaving it exposed to a material revenue reduction as "sharks" seek easy pickings elsewhere.
Dividend Declaration
With the Sept. 1, 2006 announcement of its interim results, online gaming company 888 announced that its board of directors has approved the payment of an interim dividend of 4.5 cents per share and a special dividend of 4 cents per share to holders of 888's ordinary shares. The board has confirmed the details of the payments--to be paid together as one aggregate dividend equaling 8.5 cents per share--and has approved a payout date of Oct. 31, 2006.
Reporting
Sportech Plc (SPO.L), operator of the Littlewoods gaming brand released its interim results for the 26 weeks ended July 7, 2006. Highlights include a colossal increase in profit after tax including gains from exceptional items of £11.5 million, compared to £1.9 million in 2005. Profit after tax from continuing operations increased by 25 percent to £5 million, compared to £4 million in 2005.
The company employed strategic, money-saving moves for the first half of the year, including unloading loss-making Bet Direct for £12.5 million in cash and terminating its ITV contract and closing the division.
Sportech Plc - Six-Month Results