|
|
#1
06-15-2005, 02:58 PM
|
|||
|
|||
Economist article on Party\'s IPO
Nothing new really, but I thought some of you might like to read it. The last line in this article is just embarassing.
----------------------------------------- Flush Jun 9th 2005 From The Economist print edition A London listing for a business that may be illegal in its main market IF YOU are playing poker and you can't tell who at your table is the sucker, then it is probably you. That piece of poker lore may be worth pondering by those about to snap up shares in the forthcoming initial public offering (IPO) of PartyGaming, the world's leading online poker site. The listing of 23% of PartyGaming's shares on the London Stock Exchange is expected to give the firm a market capitalisation of at least $10 billion ($18 billion), making it one of the 100 biggest listed British firms. Can that value possibly be justified? After all, PartyGaming, though profitable and fast growing, with strong cashflow, has been in its main business for under four years. It faces competition that is fierce and intensifying. And it makes most of its money from an activity that, in America, its biggest market, is probably illegal. PartyGaming will join Sportingbet on the London Stock Exchange. Empire Poker will list on the Alternative Investment Market. See also the Gaming Act of 2005. Richard Segal, PartyGaming's boss, says the firm not only has huge growth potential but already pays a dividend that a mature company could be proud of. The IPO is intended not just to raise some cash for its founders (including Ruth Parasol, described in breathless media reports as an erstwhile adult entertainer), but also to help fund even more rapid expansion, both geographically (online gambling in Europe and Asia lags behind America) and into other sorts of games. And as the industry consolidates, PartyGaming expects to use its shares to buy up its rivals, both online and, quite likely, in the traditional betting business, too. It wants to become the world's leading gambling company. The hype surrounding gambling shares—other popular ones listed in London are BetFair, Sportingbet and Betandwin—is eerily reminiscent of the internet bubble in 1999-2000, when investors paid daft prices for firms with identical, untested, business models. Yet even if growth slows sharply, the numbers could still look attractive. Dresdner Kleinwort Wasserstein, the investment bank underwriting the IPO, expects the global online poker market, which has quadrupled in the past two years, to quadruple again by 2008, by which time it expects overall online gambling revenues to exceed $18 billion. Can PartyGaming become the eBay of online gaming? It has a market share of over 50%, and says it hosts over a billion poker games a year. Like eBay it benefits from early-mover advantage. It spent heavily on marketing from the start, making headlines by hosting a tournament with a $1m first prize, and offering punters the chance to qualify for a lucrative tournament cruise off the coast of Mexico. Last year its marketing budget was over $100m. PartyGaming may benefit from network effects similar to those eBay enjoys: it is based on a many-to-many model for which the internet is ideally suited. The more people use the site, the wider the variety of games available at any one time, the more attractive the site becomes and the more trustworthy the company looks. On the other hand, although scale may give PartyGaming some advantages, it is not immune from competition. James Hipwell, editor of InsideEdge, a gambling magazine, wonders how loyal punters will be to a firm that rakes off at least 3% of every pot for itself, when rival firms offer to take a smaller slice. Dresdner expects PartyGaming's market share to dip below 50% this year. And then there is the legal risk. Maybe 90% of PartyGaming's punters are Americans who are avoiding domestic prohibitions by betting offshore. PartyGaming argues that it is doing nothing illegal and that a recent ruling by the World Trade Organisation may yet cause America to loosen its rules on gambling. Anyway, there may not be much that the American authorities can do to stop PartyGaming. It has no employees or assets or servers in America. It is headquartered in Gibraltar, a British offshore regulatory and tax haven. Although two of its four founders are American citizens (the other two are Indians) they live in Britain, now the gambling capital of the world. The Gambling Act 2005, which has just come into force, provides a strong legal footing for online excitements of all sorts, from internet poker to betting exchanges (in which customers bet against each other, rather than against a bookmaker). All of which, says PartyGaming's management, are reasons to be optimistic. Unless, of course, they are bluffing. 
|
 |
|
|
Linear Mode
