888.com lowers its flotation price

[chrisg]

888.com lowers its flotation price following fears of a slowdown in the online gaming sector

Nils Pratley
Friday September 16, 2005
The Guardian


Online casino 888.com yesterday made a deep cut in its flotation price in the face of investor scepticism towards online gambling prompted by rival PartyGaming's warning last week of a slowdown.
888.com said it would price its shares to give a market capitalisation of £546m to £715m. It previously indicated it would seek a price of about £800m.

Rupert Faure Walker, investment banker at HSBC, sponsor to the float, said the cut was directly a result of the warning from PartyGaming that caused a rout among share prices across the sector.

"PartyGaming's share price has come back by a third. Sportingbet [owner of Paradise Poker] has also come back. That's the reason," Mr Faure Walker said. "If it hadn't been for that we would have got a higher price than the indicative range."

888.com tried to distance itself from PartyGaming's troubles by insisting it had seen no evidence of the supposed downturn in online gambling. That strong statement on current trading helped to generate a modest rally among quoted operators yesterday. PartyGaming rose 5%, Empire Online 8% and Sportingbet 11%.

888 said its poker operations, where its Pacific Poker website is a direct rival to PartyGaming's market leader Party Poker, had enjoyed a 226% increase in revenue in the first half of this year. It added that July - the point when PartyGaming said the slowdown began - had not seen a noticeable shift. Its poker revenues in July and August were roughly one-third above the average of the first six months of the year, 888 said.

"Based on trading since June 30 and the outlook, the directors' expectations remain unchanged for further growth and market share gains by its poker business," the group said. 888 added that revenues in its online casino, which represents 65% of its income, were up 14% in the first half.

Chief executive John Anderson said it was "very encouraging" that July's and August's numbers were both higher than the first-half averages; those months are the height of the holiday season and traditionally produce weaker numbers.

The lower valuation will still crystallise the multi-million fortunes of 888's founders. Avi and Aharon Shaked own 70% of the online casino company and are to sell a quarter of their stake through the flotation. At the midpoint of the pricing range, they will reap £110m in cash and be left with a shareholding worth about £330m.

888's final flotation price will be announced ahead of the start of conditional dealings on September 29. Retail investors will not be able to trade in the shares until October 4.

[grinin]

Of all the poker related floats, this is probably the only one with great potential in both the short and long term. One of the basic reasons is because they have so many things that they could fix relatively cheaply. The dynamic they have with their robust casino operation also makes the growth of the poker room significantly more stable than Party.

[Uglyowl]

[ QUOTE ]
One of the basic reasons is because they have so many things that they could fix relatively cheaply.

[/ QUOTE ]

If they are aware of these and are that easy, they are the dumbest people in the world to float this while not running at what they feel is their best.

[grinin]

[ QUOTE ]
If they are aware of these and are that easy, they are the dumbest people in the world to float this while not running at what they feel is their best

[/ QUOTE ]

I don't think so. I think the float had far more to do with trying to take advantage of the huge interest in the recent Party float. Little did anyone know (at least that's what Party says) that Party was going to take a hit so quickly.

Additionally, it is pretty clear that investors care little about how the poker room actually operates and would have no clue even if they did care. So the problems that we see with Pacific as poker players just are not relevant to the investors. Obviously Pacific has not cared about them either. Possibly because they so many other things on their plate, or management is incompetent? Whatever reason, these are issues that can be resolved and surely will be at some point in time. Once they are resolved and the poker playing experience is improved at Pacific they will see additional growth.

[dibbs]

Sorry for the tangent Owl, but I have to ask, what's the story behind your avatar? I've been thinking it's some sort of champion poet lauriet midget for quite some time, I feel I should be corrected.

[krazyace5]

Its an old WWF wrestler, the million dollar man Ted Dibiase

[billyjex]

i wonder how much more money pacific could make if they let people multitable.

[Uglyowl]

[ QUOTE ]
Sorry for the tangent Owl, but I have to ask, what's the story behind your avatar? I've been thinking it's some sort of champion poet lauriet midget for quite some time, I feel I should be corrected.

[/ QUOTE ]

Krazy Ace is correct, it is the Million Dollar Man Ted Dibiase, if you never saw him in action you missed out on comedy gold.

Keep on thinking poet lauriet midget though, that is funny.