Amidst the hype and enthusiasm surrounding Party Gaming's confirmation
that it was to list in London, The Independent's US correspondents
introduced a sober note.
In a story on the big listing, it was pointed out that American regulators
are threatening to clamp down on illegal internet gambling, and that
this could damage prospects for PartyGaming's planned $10bn (GBP 5.5
billion) stock market flotation later this month.
The report quotes a spokesman for the Department of Justice who apparently
said without disclosing details this week that "....various
investigations are ongoing" against internet gambling
companies. He added there was a "...potential liability"
of criminal prosecution for individuals who it finds have gone against
the (Wire) Act.
Taking a more positive view, Greg Feehely of Altium Capital, said:
"There is no doubt that there is a regulatory risk attached
to this company and investors need to be aware of that [...] but that
risk has also already been priced into PartyGaming's valuation. A
company with that sort of growth record and potential would float
at more than 20 times earnings. It is only being valued at around
10-12 times earnings, because of the risk of the uncertain legal situation
in the US."
Another story that surfaced in the British financial press, alleged
that the FTSE software firm SAGE's major shareholders are less than
pleased with their chairman Michael Jackson for helming PartyGaming's
projected GBP 5.5 million coming listing on the London stock market.
Top investors are allegedly calling for Jackson to step down as chair
of the controversial gambling firm after just three weeks on the job,
and they're calling for his resignation.
Others believe Jackson cannot devote enough time to his software firm
responsibilities. "Jackson's new role will be significantly
time-consuming," one institutional investor claimed.
Shareholders are also angered by Jackson's multiple chairmanships. PartyGaming
will be in the FTSE 100 after it floats, meaning he will chair two companies
in the leading index - contravening strict corporate governance guidelines.
Finally, The Guardian reports that London's biggest stock market flotation for years has been overshadowed by advice from Washington that the four dotcom millionaires behind the venture risk arrest and prosecution in the United States.
According to the Department [of Justice], online gambling operators such as Ms Parasol, 38, her husband, James Russell DeLeon, 39, and their partners, Indian computing experts Anurag Dikshit and Vikrant Bhargava could face prosecution under three federal statutes: the Interstate Wire Act, the Illegal Gambling Business Act and the Travel Act. These carry penalties of between two and five years' imprisonment for each offence. A DoJ representative said "If they're taking bets in the UK, and it's legal there, that's fine; but if they're taking bets in the United States, that's il legal, and they will be prosecuted."
Update (24 June, 2005) - Fund managers
planning an investment in Party Gaming have shrugged off the US regulatory
risks allegedly attached to the Gibraltar-based online poker operator
by placing sufficient orders for shares to ensure that the company will
float next week.
By Tuesday evening this week, well ahead of the listing date of June
27 the group's book was fully covered, valuing Party Gaming within its
indicated price range of $8 billion - $9.2 billion (£4.4 billion
- £5.04 billion).