Gambling News - June 2005 Edition

"Legal Ambush Could Slash Party Gaming's 5 Billion Jackpot"

U.S Government mounting all-out campaign against online gambling

The U.S government is becoming more and more forceful in its anti-online gambling campaign. It is determined to thwart the industry’s increasing growth. This is in strict accordance with its stance against online gambling. The policy could seriously affect the future of online gambling businesses, and, in particular, those businesses that have announced their intention to float on the London Stock Exchange.

Some of the aggressive measures that the U.S. is pursuing include a crack down on advertising for online gambling sites and this has already forced Esquire magazine to pull ads for online poker site. Internet giants Bodog.com, and ESPN, Yahoo! and Google have already stopped accepting online gambling ads for their American sites. Credit card companies have been banned from dealing with online gambling sites and PayPal, which is owned by eBAY, and Chase are no longer allowing gambling transactions. This last restriction could prove particularly damaging to online gambling companies since many of the players at these Internet sites reside in the United States.

Information on the financial advisors for the float, led by Dresdner Kleinwort Wasserstein, will also be provided. All of the information will be closely scrutinized. Dresdner Kleinwort and Wasserstein stand to make as much as 44 million pounds if the 5.5 billion pound float price is reached. Ruth Parasol, who made her first fortune in the Internet porn business, along with her husband Russ DeLeon and two other founders, will retain a 77 percent stake in the business. Some prospective investors think that PartyGaming’s expectations for the flotation is too high and that the company should follow an approach similar to the approach that Empire Online is taking.

Empire Online, which is the first online poker group to float in London, raised 123 million pounds, including 19 million pounds of new money. They will have a market value of more than 500 million pounds and will be valued at 14 times this year’s earnings, which is much lower than the 24 times that PartyGaming is hoping to achieve. One City fund manager said: “Never mind the dividend yield, this ought to be priced at a modest valuation and yet it doesn’t seem to be coming at a modest valuation”.

PartyGaming, would definitely feel the effect of the U.S. anti-gambling measures as most of its online customers are from the U.S. The company is preparing for a controversial 5.5 billion pound flotation on the London Stock Market and the prospectus, which is to be released in advance of the flotation, will include information about the legalities of online gambling in the United States as well as information on the company’s four billionaire founders.

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