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06-21-2005, 10:15 PM
Investors bet on PartyGaming
By Matthew Garrahan
Published: June 21 2005 22:06 | Last updated: June 21 2005 22:06

PartyGamingFund managers planning an investment in PartyGaming have shunned the US regulatory risks attached to the Gibraltar-based online poker operator by placing sufficient orders for shares to ensure that the company will float next week.

At 5pm on Tuesday, the group's book was fully covered, valuing PartyGaming within its indicated price range of $8bn-$9.2bn (4.4bn-5.04bn).

The group would be catapulted into 54th place in the FTSE 100 and worth more than J Sainsbury if it was priced at the top of its 111p-127p range.

"We've got significant benchmark orders and we expect more to come," said one person close to the company. "We certainly don't expect to have to drop the price range."

Some investors had pushed for a cut in the price range, arguing that there were too many regulatory risks associated with PartyGaming.

The group makes about 90 per cent of its revenues in the US but warned in its prospectus that the US Department of Justice "considers that companies offering online gaming to US residents are in violation of existing federal laws".

However, the attractions of PartyGaming appear to have proved too great to investors. The group is forecast to generate 2005 earnings before interest, tax, depreciation and amortisation of $533.2m on turnover of $974m.

Another person close to the deal said the price range was "set after huge consultation with investors".

"Investors understand all the issues that relate to this company," the person said. "That's what matters most - they need to be aware of the ups and downs, and then take a view."

PartyGaming saw institutional investors on Scotland on Monday and met fund managers in London on Tuesday. More meetings will be held with potential investors in London on Wednesday, Thursday and on Friday.

The group, which is limiting its investor roadshow to the UK and Europe, is believed to have received "firm orders" for stock from three of the top 10 UK funds. "The positive feedback we got in pre-marketing has been confirmed by order flow this week and the price range has also been fully endorsed," said one person close to the deal.

Another added that negative articles about the risks attached to PartyGaming had made investors more cautious but had failed to damp their enthusiasm.

Some investors have voiced concern about the group's ability to retain its customers. Most so-called "real money" players tend to desert PartyGaming within 12 months of using the site.

Investors bet on PartyGaming (http://news.ft.com/cms/s/ab5bbfda-e287-11d9-84c5-00000e2511c8.html)