Excapsa Software Inc.-- a Canadian holding company of a group which develops, maintains and markets online gaming software applications and manages a poker network whose principal operator is Ultimatebet— floated on the Alternative Investment Market of the London Stock Exchange this week with a total fundraising of £56.2 million and a market capitalization on admission of £214.2 million.
The float was undertaken by Berwin Leighton Paisner LLP (BLP), a City law firm with offices in London and Brussels and alliance offices in New York and Paris. The firm is the current holder of the Chambers' "UK Law Firm of the Year" award.
BLP's corporate team, meanwhile, is ranked number one for AIM IPO's and ongoing AIM company work by the Legal 500. The company practices in mid-market M&A, equity capital markets, private equity, investment funds and corporate recovery. Among its wide array of clients in various industry sectors are several companies that deal in the remote gambling space, including CryptoLogic, NETeller and Gaming & Leisure.
IGN recently spoke to David Collins, head of corporate finance for BLP's corporate team, to learn about the Excapsa float and other matters affecting online gaming stocks.
IGN: What sort of experience does Berwin Leighton Paisner have in conducting IPOs and other business deals for remote gambling companies?
David Collins: Berwin Leighton Paisner (BLP) has a very strong track record in corporate transactions for remote gambling companies. As well as the lead corporate adviser to Excapsa Software on its very recent AIM IPO, we have been involved with the London IPOs of CryptoLogic, NETeller, Gaming VC, Leisure & Gaming, Cyberscan Technology and Party Gaming. We have also been involved in the two follow-on share offerings by certain of NETeller's founder shareholders.
On the M&A side, we advised the sellers of Paradise Poker to Sportingbet, Trident Gaming on its acquisition of Gamebookers, Gaming VC on its acquisition of Casino Club, Leisure & Gaming on its acquisitions of VIP, Acropolis, English Harbour and nine.com, and NETeller on the acquisitions of Quick Access International and Netbanx.
We have also been involved in several bank financing and re-financing transactions in this sector, acting principally for Barclays and The Royal Bank of Scotland.
IGN: What kind of services can BLP offer to companies in the remote gaming industry?
DC: As a full service law firm with a deep understanding of the remote gambling sector, we provide a broad range of services to companies operating in the industry. We act for a good mix of operators, software and money providers, providers of hosting services, investment banks and brokers and clearing banks, and offer regulatory, jurisdiction and gambling product advice, licensing applications and commercial contract work, employment, litigation and tax services, as well as the full spread of corporate advisory and transactional work.
Because of the presence we have built up in industry over the last five years, we are also able to introduce and network industry clients and contacts with each other and are often asked by clients to perform broader strategic and commercial advisory roles. We have also built up very strong relationships with the regulators across the various jurisdictions, which enable us to provide pragmatic, commercial advice on a host of regulatory issues. Most recently, we have also been involved in the drafting of the new remote gambling legislation in the Isle of Man, which clearly gives one a strong insight into the operations of the regulator.
IGN: What are some of the most significant aspects of the Excapsa float?
DC: The IPO of Excapsa Software clearly represents a landmark transaction for the company, and has facilitated substantial funds being raised for the company as well as some selling shareholders. Within a broader industry context, the transaction also demonstrates the continued appetite within the institutional investment community for good quality companies with strong management teams, a good market position and strong prospects.
IGN: Why has the investment community shown so much interest in the Excapsa float?
DC: Principally for the reasons described above.
IGN: Is BLP working on any other deals in the remote gaming space at the moment?
DC: Yes, we are continuing to work on several equity capital markets and M&A transactions in this space, although I can not, for the time being at least, be more specific than that.
IGN: It appears that we are currently in a time when the public markets offer lots of opportunities to remote gambling companies; how long does it seem like this could last?
DC: As long as the industry continues to grow along the lines of current industry estimates and the capital markets generally hold up well, I see no reason why we won't continue to see several more sector related corporate transactions involving the equity capital markets. Whilst I don't necessarily think that we are going to see a huge number of IPOs this year, bear in mind also that the equity capital markets are used to effect M&A transactions, either in the form of the listed buyer offering its quoted paper in consideration for a target business or by issuing new shares into the market to raise the cash to buy a business. There are still a number of quoted companies out there with buy and build strategies and the consolidation of the industry is bound to continue at all levels.
IGN: What sort of impact might the passage of a prohibition bill in the U.S. have on I-gaming stocks in London?
DC: Always a difficult question to answer!
I do think that the equity markets have become far more sophisticated about the different types and extent of regulatory risks faced by the various listed remote gambling companies already out there, and the share prices of those companies have built in to them varying degrees of discount to reflect the level of perceived risk. Quite what the exact level of discount is in any particular case, and whether it is applied consistently and fairly across the sector, are open questions. The share price of any quoted company is open to fluctuation for all sorts of reasons, some of which are specific to the company and/or its peer group, and others which are driven by general market sentiment and conditions and broader economic factors.
Clearly, if the US legislature is ultimately successful in impeding the growth of the US remote gambling market through, say, the prohibition of certain money transactions used to fund online wagering, then companies who are heavily reliant on the US market, both in terms of their current financial position and their prospective growth, are likely see their share prices hit. That being said, we all know from past experience that there are many twists and turns to the legislative process in the US, and the industry has become a more coherent and vocal lobbying force in recent years. The industry also has a strong record of innovation and finding creative solutions to potential regulatory obstacles. In any event, we can already see that many of the existing operators have started to succeed in increasing their presence in non -US markets, which is clearly sensible in terms of a risk management strategy.