Party Gaming See a Third Slashed Off Their Stock Value – September 7th, 2005
Gambling shares came off the boil in dramatic fashion yesterday after poker giant Party Gaming unsettled investors with a warning about future growth. The owner of PartyPoker saw its shares slump by a third – wiping more than £2 billion of its value – just two months after its spectacular stock market debut.
The Gibraltar-based group said in its maiden interim results: “Against a background of moderating market growth, group revenues are expected to continue to show good year-on-year growth, although at rates lower than the substantial rates previously experienced.” This was despite it reporting a 70% hike in earnings to 257.7 million US dollars (£140 million) and an 81% rise in revenues for the six months to June 30.
Many experts have expressed concern about the potential for the boom in online gaming to be a fad, while the legality of online poker in the United States has been an issue. Analysts said the stocks were settling down to more sustainable levels after running too far ahead in recent weeks.
Paul Leyland at stockbroker Seymour Pierce said: “We believe that the market is sensible to correct some of the froth that has surrounded the sector.”
He believed the changed of the timing of the television broadcasting of the annual World Series of Poker was key, as the show made the poker market. It was broadcast in the second week of July last year but was only aired in late August this time.
Despite PartyGaming’s comments about the sector, casino operator Cassava was standing by plans for a market listing. The world’s largest online casino unveiled plans to float just last week, with an expected market value of £700 million.
A spokesman said the plans were still “totally on track” and that the businesses were very different, due to PartyGaming’s concentration on poker and reliance on the US market. Monday’s figures included an 89% rise in poker revenues. PartyPoker.com is the world’s largest online poker site and had 415,633 active customers in June. The group also has gaming brands including Starluck Casino and PartyBingo.
Analyst Hilary Cook, at stockbroker Barclays, said: “The shares had enjoyed an extraordinary debut, much better than we expected, but they are very vulnerable to any disappointment. The City never likes nasty surprises and this is a difficult business model to predict.”
Richard Hunter, at broker Hargreaves Lansdown, said the reaction was “rather extreme” and said he believed the fundamentals of the online gaming story had not changed dramatically. Shares in Sportingbet were 13% lower, despite it saying in a statement that it was continuing to trade in line with management expectations, while Empire Online was off 14%.
