SEC probes Doyle

[mackthefork]

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Someone made alot of money in that circus.

While I feel for Doyle I somehow don't see how he can be blameless in this. But on the other hand I can't see him being stupid enough to try this kind of moronic trick either. Oh well, I am fairly sure the SEC will manage to pierce attorney privilege and take this to court. Will be interesting to see who pulled the strings.

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No, but I can see him being retarded enough, to get involved with people who would, without any actual dishonest intent on his part.

Mack

[memphis57]

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No, but I can see him being retarded enough, to get involved with people who would, without any actual dishonest intent on his part.

Mack

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Without knowing Doyle but knowing a little about those situations, this is the explanation that best fits the known facts, IMO. That's assuming Doyle isn't a financial genius and would be unable on his own to say whether WPT was worth $700 mil or $300 mil. It could even be his whole group falls into that category and the money was made by wall street traders - but that's not likely. More likely, either one of his investors or, possibly, an advisor was playing a side game on his own. Part of the answer may lie in why the stock was worth 18 before the bid but 6 after. Was somebody accumulating prior?

[BassMasterK]

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Part of the answer may lie in why the stock was worth 18 before the bid but 6 after. Was somebody accumulating prior?

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I can shed a little light on the 18 before, 6 after (of course all opinions but I followed the stock heavily until a month ago or so). First of all, the company was overvalued at 18, but there were a lot of people who were buying into the popularity of poker and saw this as a juggernaut that was going to be the king of poker. There was talk of a new wpte casino website. There was talk of them restructuring their deal with the Travel Channel. There was talk of a new poker show: Professional Poker Tour. The big one really though was the money they were going to rake in on that website. Also, they have the wpt brand with cards, poker sets, table tops, videos and the like.

After the offer fell through, people were not willing to speculate so much on the popularity aspect and were looking at income sheets. WPTE lost their auditors less than a month before quarterly reports were due. The auditing company said that the WPT casino was a gray area legally that they weren't comfortable with, the risk was not worth what they would get financially to be associated with WPTE. When you get dumped by your auditing company, it looks really bad and is usually a bad sign of things to come. LACO, their parent company was delisted for not having paperwork in on time (I think they also had auditor problems but I can't remember for sure). Then WPTE announced they were nearing a deal for broadcasting rights of the Professional Poker Tour, but then it fell through. Their attempt at working a new deal with the Travel Channel was not going well. The new website came out, but appeared to not be heavily advertised or announced with any fanfare. Only a few hundred people were on at peak hours and most of them were at free tables. Then it was frequently buggy and was either shut down, or only the few pay tables were up. The english used in the 'sorry we are not working' announcment on the site looked like it was written by a third grader. People lost confidence that a site that could not allow americans on the pay tables, and a site that used the British pound instead of the EU dollar was not going to get enough players to be successful.

You add all this together and you can see how shareholders became very cautious and that pushed the price down. The catalyst that got the ball rolling down the hill though was the Doyle bid.

[Timer]

My take on this is somewhat different. A lot of people got on board the IPO. Others bought into it a while later. The show was popular, poker was everywhere, and the stock went up. The problem is that all of those holding a lot of stock can't all get out at once without sending it (a stock with no earnings by the way) into a nosedive. It's a thinly traded stock so you need some news to create interest.

In steps Doyle Brunson who announces a MAJOR buy-out at a RIDICULOUS price. The stock jumps on the news and all of the insiders are able to get out--at inflated prices. The average-joe-sucker who "bought on the news" gets left holding a worthless bag. As soon as it's discovered that there wasn't any real interest in this stock in the first place (and the fact that Doyle's bid was a sham) the stock starts to go back down where it belongs.

This all came to my attention one day when I was looking at charts. Out of curiosity I looked up the WPT stock chart and saw a very interesting pattern.

http://tinyurl.com/8yscc

I got very curious about the sudden run up on HUGE volume and then the subsequent decline. I got to thinking about it and did some research about when Doyle made his announcement. Well, it was no coincidence that the exact top of that chart is when Doyle made his buyout offer.

[ QUOTE ]

This all came to my attention one day when I was looking at charts. Out of curiosity I looked up the WPT stock chart and saw a very interesting pattern.

http://tinyurl.com/8yscc

I got very curious about the sudden run up on HUGE volume and then the subsequent decline. I got to thinking about it and did some research about when Doyle made his announcement. Well, it was no coincidence that the exact top of that chart is when Doyle made his buyout offer.

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You're misinterpreting the chart. (I'm neither here nor there on the actual question, but thought I'd throw in a little trading info. . .)

There was no run-up in this stock. This was what's called a spike, or gapping up. Either overnight, or during a break in trading (when trading was temporarily frozen because of news being clarified), a lot of people put in orders to purchase. When trading re-opened, there were so many bids to buy at market that the running price gapped up, and that termendous volume hit all at once. Looking at the chart you provided, after the gap up on the news, the stock dove in massive trading. It's a little easier to see on the 6-month chart right now: http://bigcharts.marketwatch.com/quickch...eq=1&time=7
There it's easier to see that the stock gapped up overnight, as speculator digested the news, and the volume hit after.

Other general info:

Stock movements like what happened at the beginning of July are common on rumors or news. It's standard fare any time there's a rumor or news powerful enough to cause the floor to halt trading on a stock pending clarification. Investors who had built up positions in the stock in prior months at 10-20 would naturally take profits on such a spike, many of them from automated sell order pre-entered into computers. Other investors, who play stocks based on news, would be putting in buys like mad in speculation that the offer will go through, and drive the price up to $36. The speculators drove the price up, the rational market drove the price down. The result is huge volume.

Secondly, the impact of these Shenanigans was not $36 to $6, as some hav been saying. The news spiked the stock into the 25-30 range. After clarification, it fell to the 20-23 range, where it traded for several weeks after. The subsequent plummeting to $6 had nothing to do with the incident; it was a gradual correction probably having to do with the company's misfortunes.

Thirdly, buyout offers like this are generally made at generous premiums to value. Thinly traded stocks are not very liquid, so a spike is always expected, and a company with no hard assets is always difficult to appraise. If this were a manufacturing firm, it would be easy to set a hard value, and the premium would not be likely to be so out of line with assets, but this is a service firm with an unknown market future. Like internet stocks before the market understood the net, the potential for profit was huge, so a big premium to capture the company is not unusual.

It would be easy to conceive the following scenario;

1. Big investor sees the size of the WSOP crowd and decides to make a move.
2. Investor contacts Brunson to particpate as the face of the the offer.
3. Hasty decision are made in hopes of taking advantage of WSOP publicity.
4. The lawyers decide this hasty nonsense is unacceptable and a probably risk with the SEC, and pull out.
5. Buyer has remorse as his advisors point out the underlying company's weakness. Poker may be a sure thing, but the WPT doesn't look so hot as a company.
6. Bidders back down; chaos ensues.

I'm not saying that's what happened; I'm saying it's possible. It's equally possible that the big bidder accumulated a big position during June at prices of 18-23, and when the stock drooped to 17 in early July, they conspired to spike the stock so that they could unload without taking a big hit.

The investigation will likely tell; the question is what big investors acquired a lot BEFORE the spike and unloaded AFTER. If no related individuals made big profits (other than professional speculators who day-trade stocks like this all the time), then it's likely that there is no real conspiracy.