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Tue, Oct 03, 2006 - Page 10 News List

Gambling firms' shares nosedive after decision in US

GOING DOWN Shares in online gaming companies took a tumble after the US Congress passed a bill aimed at cracking down on Internet gambling


Online gaming firms faced their biggest-ever crisis yesterday after the US Congress unexpectedly passed legislation to ban online gaming there, threatening jobs and hitting stocks by as much as 70 percent.

Britain's PartyGaming Plc, operator of leading online poker site PartyPoker.com, and rivals Sportingbet and 888 Plc said they would likely pull out of the US and warned on future profits.

PartyGaming's shares fell 59 percent by 0725 GMT, while Sportingbet lost 64 percent, 888 was down 45 percent and gaming software provider Playtech fell 55 percent.

Austria's bwin.com Interactive Entertainment fell as much as 22 percent in the first few minutes of trading.

"They generate a substantial amount of revenue from US gamblers and this is going to cut their forecasts," said a trader.

"Nobody knows how hard it is going to hit the companies, but you need a brave person to jump in and buy these stocks now," he said.

US Congress unexpectedly approved a bill early on Saturday that would make it illegal for banks and credit card companies to make payments to online gambling sites.

The House of Representatives and Senate approved the measure and sent it to US President George W. Bush to sign into law. Most analysts think his approval is certain.

"We believe that this will have a very material impact on the long-term prospects of online gambling, and in particular poker," said analyst Julian Easthope at UBS. "This will lead to a rapid decline in the use of online poker sites."

PartyGaming generates about 78 percent of its revenue from the US, while Sportingbet gets about 62 percent there.

PartyGaming said in a statement: "If the President signs the act into law, the company will suspend all real money gaming business with US residents, and such suspension will continue indefinitely."

"Any such suspension would also result in the group's financial performance falling significantly short of consensus forecasts for 2006 and 2007," it said.

PartyGaming's smaller rival Sportingbet said the likely ban would hit trading, and said it had scrapped a planned merger with World Gaming as a result of the passing of the legislation.

888 Plc said the move would hit its results, but stressed it remained a profitable and viable business.

Any ban would also hit payment-processors like Neteller Plc and Optimal Group's FireOne subsidiary.

The measure, added to unrelated legislation providing US$3.4 billion for US port security, makes it unlawful for credit-card firms to collect payments for transactions with online-gaming sites.

Gambling on the Internet is a US$12 billion-a-year business that is growing rapidly offshore. Internet-based casinos such as PartyGaming Plc and 888 Holdings Plc, operating in locations such as Gibraltar and Antigua, take in billions from US gamblers.

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