Following its March I.P.O. and licensing agreement with Entraction Holding, Devilfish Gaming is off to an ambitious start as a publicly traded company.
Paul J. Barnes, the company's chief executive, spoke with Interactive Gaming News about his motivations for going public, views on the European regulatory climate, operational philosophy amid a global economic recession and more.
Q. Why did the company elect to go public now?
A. When you take a company to the market there is a significant lead in time. The project involves pulling together brokers, accountants, auditors, lawyers and others, finding and appointing directors and staff, as well as complying in full with the requirements set by the regulators and other authorities. The Devilfish float involved all these parties working together over many months. You cannot control the external financial environment, and it so happens that the market became more volatile during the final stages of the admission process. C'est la vie. The primary reason for going public was firstly to raise working capital to fund core operations and to build new corporate infrastructure. The second reason was to establish a vehicle for mergers and acquisitions. So, we were determined to float.
Q. What about the current market conditions? Did the company find these challenging?
A. Yes, and that's an interesting question. Our chairman, Kevin Leech, has a pedigree of expertise achieved through his direct involvement in around 20 stock market I.P.O.s on both sides of the Atlantic, and with his history of entrepreneurial investments, he has probably seen everything there is to see and experience in the financial markets. So he was a calming influence. I was also personally involved in a previous float in Australia, which had taken many months to prepare and was unfortunately pulled at the last minute due to political intervention. You must try not to worry about matters outside of your control. So, if you forgive the derring-do, it would have been very difficult to throw us off the course that we had set for ourselves! In moments of stress, one can always have a quiet read of Rudyard Kipling's poem, "If."
"If you can keep your head when all about you/Are losing theirs and blaming it on you/If you can trust yourself when all men doubt you/But make allowance for their doubting too . . . "
Q. What about the current market conditions did the company find opportune?
A. In floating we were swimming against the tide, which in business can bring great rewards. There is no doubt that the float has generated a significant degree of interest in our company, its prospects and its performance -- and the share price has risen. Indeed, we take some pride in investor confidence for our stock; especially given the challenging environment in which we chose to float. And we have a solid business strategy in place for revenue growth. Watch this space!
Q. What type of investor did the company seek?
A. There is no doubt that online gaming has risk attached. We made that quite clear during the sales roadshow. The ideal investor is one who is willing and able to set aside a portion of his investment budget for high-risk ventures, who understands and buys into the vision of the company's principals and goals and who brings other non-cash assets to the venture in the form of related business connections.
Q. Even though the company does not offer play to U.S. residents, were investors still concerned that the Unlawful Internet Gambling Enforcement Act would have an impact on the company's business?
A. I think the UIGEA has already achieved maximum impact. We have made it perfectly clear that we will not take U.S. wagers in any shape or form, but we will certainly enter the U.S. market if and when doing so is not illegal and we are fully compliant with the regulators. Our brand is already well established amongst the poker playing population in the United States through the efforts and successes of Dave "Devilfish" Ulliott. When the U.S. gaming market is opened under a regulatory licensed regime, then Devilfish Gaming will be in a strong position to take advantage of that market, and our investors will benefit from any upside.
Q. How important, now, is having the right license in the right place?
A. I think the only way to answer that question is to take a snapshot in time and comment on those particular circumstances. This is because the legal and regulatory environment is in constant flux: It flips up and down like a yo-yo. It's complex with states within states making different rules. Look at Lower Saxony within Germany; look at Germany within the European Union. Look at France. Look at the autonomous regions in Spain. Look at the regional blocks within Argentina. Add to that the myriad tax and VAT rules and it's enough to make you re-read Kipling! Our current approach is to be licensed in the European Union, but we will adapt where required according to our target markets.
Q. I've seen in Devilfish Gaming's pro forma, and again in its half-yearlys, that Devil Fish Poker Ltd.'s license with Kahnawake -- and the lack of advertising opportunities it affords -- remains a concern.
A. It would be a concern if we were doing nothing about it. Right now, we are integrating the new Devilfish Gaming system with our suppler, with an estimated launch in May 2008. As such, we are not actively advertising at this time. We will relaunch under an EU license, which will solve the above problem (and bring a sigh of relief to the gaming publishers!).
Q. What concerns you most about the current European regulatory climate?
A. The common concern in the industry is that states will, as the expression says, throw the baby out with the bath water, rather than bow to the inevitable and institute a licensed, regulated environment in an open market. The recent Glücksspielstaatsvertrag in Germany is a case in point. Luckily, EU Internal Market Commissioner Charlie McCreevy is taking a no-tolerance approach to violations of cross-border and inter-border services and is chasing non-compliant states. Personally, I don't believe that there will be any quick solutions, as there are too many monopolies with too many vested interests. For example, why are there 16 state lotteries in Germany, with at least sixteen C.E.O.s, when there is only one lottery and C.E.O. in the United Kingdom and in France? Established culture is a hard thing to change.
Q. What have you found advantageous about being publicly traded?
A. At this point in time, being public raises the profile of the company in the industry and generates a lot of mostly good PR.
Q. Disadvantageous?
A. I am not sure whether I would class this as disadvantageous, as it is probably a positive, but being public does involve certain responsibilities and a level of diligence and compliance. So we try to apply due care in all decisions that we make.
Q. What new opportunities, if any, has being listed afforded?
A. We receive a lot of communications from companies and individuals looking for co-operations, mergers, acquisitions and other partnerships. This is good because part of our growth strategy involves strategic acquisitions, and being public gives you the tools to make acquisitions, especially in the current consolidating market.
Q. You communicated last time we spoke that the company was to launch a sports book under its agreement with Entraction.
A. Yes, that is the case.
Q. How far along are these plans, and what, generally, is in store for Devilfish Gaming across the second half of the year?
A. The exact format of the sports betting offering is still under discussion and it wouldn't be appropriate for me to elaborate further at this time, other than to say that we will be offering a product. In H2 2008 you will see a fully relaunched business, with a brand augmented with the attributes of fun, irreverence, wit and interaction, as well as a multi-channel gaming business.