Gambling firms see shares plunge (UK – Online)

(source: BBC October 2, 2006)

Gambling firms see shares plunge

Legal uncertainty has hurt gaming shares this year
Shares of online gaming firms have plunged after the US Congress passed a bill cracking down on internet gambling, threatening their business.
Shares in Partygaming fell by nearly 60% in London trade, while shares in 888 Holdings tumbled by more than 45%.

Sportingbet shares fell by nearly 60% while Empire Online shares slid 27%.

Several firms have said they could stop taking bets from US customers if the bill is signed into law by President George W Bush in the next two weeks.

The law, part of a sustained clampdown on online gaming in the US, would make it illegal for banks and credit card firms to process online gaming payments from the US.

‘Shadow industry’

Companies in the online gambling arena have faced a turbulent year as the threat of a legal crackdown from the US has depressed share prices.

I can understand investors will feel a bit of panic

Gigi Levy, 888 Holdings

See Partygaming shares
See Sportingbet shares
See Empire Online shares

Bosses from two firms, Sportingbet and Betonsports, were arrested on illegal gambling charges.

UK betting giant William Hill recently said it was closing its US gaming business pending clarification of the industry’s legal position.

Most analysts expected there would not be enough time for US Congress to pass a specific law against online gambling before next month’s mid-term elections.

But lawmakers took the industry by surprise when an “Unlawful Internet Gambling Enforcement Act” was eventually attached to an unrelated bill aimed at improving port security.

‘Clear implications’

One of the firms set to be affected by the new law said its passage had come as a surprise.

“It has a specific criminal offence for taking these funds which is something completely new,” Gigi Levy, chief operating officer of 888 Holdings, told the BBC.

“It is quite clear that the bill as is has a very clear implication on the legality of our activities in the US.”

The bottom line is simple. Internet gambling is illegal

Bill Frist, Senate majority leader

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Mr Levy said his company was less dependent on the US market than it had been a year ago, having promoted itself in other countries.

“I can understand investors will feel a bit of panic,” he added.

“We will build our business back up to where it is today. We are quite confident about that.”

Gaming firms which have floated their shares over the past 18 months warned investors that their prospects could be affected by legal uncertainties in the US.

President Bush is thought unlikely to veto a bill which a senior Republican said was now needed to regulate a “shadow industry”.

“Congress has grappled with this issue for ten years,” Bill Frist, Senate Majority Leader, said.

“For me as majority leader, the bottom line is simple. Internet gambling is illegal.”

Date Posted: 02-Oct-2006