With the US legislative debacle almost through its second day, online gambling companies continued to report on the the effect the loss of US business is likely to have on corporate fortunes.
World Gaming has warned it might be in default on its debt facilities
following recent events in the US where a ban on financial transactions
to on line gambling sites was approved over the weekend.
In an announcement to the London Stock Exchange, the company said:
“Having reviewed the company’s debt facilities agreement...
the Directors believe it may be in technical default of its loan conditions
due to a material adverse change in the circumstances of the business,
arising from proposed changes in legislation in the United States.”
GigaMedia Ltd., a Taiwan developer of gambling software that bought
the Canadian turnkey provider Grand Virtual some time ago, rebounded
just over 4 percent Tuesday after the company said it does not have
any U.S. revenues, presumably due to an already existing ban on accepting
action from US players. The stock lost 12 percent on Monday.
"GigaMedia would like to clarify that it has been and remains
a pure play international business with no U.S. source revenue,"
the company said in a statement. "We therefore anticipate
no adverse financial impact from the new legislation."
GigaMedia added 42 cents, or 4.3 percent, to $10.26 in recent trading
on the Nasdaq. The stock has ranged from $1.74 to $12.55 in the past
year.
Australian (and soon to list in the UK) gambling group Betcorp slumped
56 per cent after the company admitted the law would have a "material
adverse effect" on profits.
Shares in Lasseters, which operates three online casinos, dived 51
percent, with reports that US clients could account for as much as
80 percent of income.
Consolidator and owner of the Palace group of online casinos, Fairground
Holdings advised that as of Tuesday afternoon "....none
of our properties will be taking bets from players in the following
states: Illinois, Indiana, Louisiana, Nevada, Oregon, South Dakota,
Washington and Wisconsin. We will continue to allow players to play
from the remaining states." It is understood the named
states all have anti-online gambling state laws in place.
Respected British bookie group BetFred.com, which hosts an Internet
poker room, sportsbook and casino, is taking a different approach,
closing all accounts the company believes "originate in
the USA." Account holders were sent an e-mail with a phone
number to call to claim their remaining balance from their accounts
on Tuesday morning.
PartyGaming will allow Americans to play real money games until the
new law comes into effect, and even after it does free money games
will be open to Americans indefinitely. "Customers will
continue to have access to their accounts at any time,"
said John Shepherd, Director of Corporate Communications for PartyGaming.
"Withdrawals from PartyAccounts are not prohibited by the
Act."
And in what seemed to be an advance indication that it intends to
benefit from the low company values now littering the UK landscape
in the wake of the American legislative developments, Party Gaming
has cancelled its interim dividend.
Company spokesmen said Party has cancelled its interim dividend, due
to be paid on 31 October, because it believes that cancellation will
“allow (it) to take advantage of the many attractive opportunities
in the sector that will emerge over the coming months".
Among the major turnkey providers, Playtech Ltd stated that 50 percent
of its revenues were derived from US sources. The company commented
in a statement:
"The Board of Playtech Ltd, the AIM-listed international
designer, developer and licensor of software to the gaming industry,
notes the decision by Congress in the USA to enact the "Unlawful
Internet Gambling Enforcement Act 2006.
"The Board of Playtech states that it continues to receive legal
advice regarding the impact of this legislation. Whilst Playtech is
not an operator of online gaming nor a payment processor, the Board
accepts that if this legislation becomes effective there would be
a material impact on certain of its licensees and therefore on Playtech's
revenues.
"However, in the first half of 2006 more than 50 percent of Playtech's
revenues were derived from non-US players, a figure that is steadily
increasing as the Company continues to add more new non-US facing
licensees.
"Playtech is actively growing its revenue base in Asia, Europe
and South America where the Board believes it has substantial business
development opportunities. Playtech's current new business and development
pipeline, including commissioned products, is entirely focused on
these non-US markets as are all new licensees."
Cryptologic was one of the first major companies to issue a statement
on Monday (see earlier InfoPowa reports) emphasizing its mainly European
revenues and the fact that it will be moving its head office from
Toronto to Ireland shortly.
CryptoLogic's President and Chief Executive, Lewis Rose said that
the company's licensees using subsidiary company Wagerlogic software
would obey the new US laws.
The Swedish-based Boss Media group is primarily a European provider
and is to an extent less affected by the US development. In a statement,
the Swedish company commented today:
"As the bill on banned Internet gambling payment processing
services in the United States turns into formal law, Boss Media AB
will immediately take action to block American players resident in
the United States from accessing any such services and software provided
by Boss Media.
"A ban on Internet gambling payment processing in the United
States will affect Boss Media's net sales and earnings. When Boss
Media published its interim report for the period January to June
2006, the company stated that the operating margin (EBIT margin),
adjusted for non-recurring items, was expected to be no less than
15 percent for 2006. If the bill prohibiting Internet gambling payment
processing in the United States is passed shortly, the operating margin,
adjusted for non-recurring items, is expected to be 10 to 15 percent
for 2006."
Estimates on the value of the US online gambling market component
in the $13 billion global industry are that it is worth around $7
billion with a compounded growth rate of some 21 percent per annum.
Clearly this will slow substantially in the event of an American shut-down.