The world\’s largest online poker operator, which generates around 78 per cent of its revenues from the US, said that if the Unlawful Internet Gambling Enforcement Act of 2006 is signed into law, “the company will suspend all real money gaming business with US residents, and such suspension will continue indefinitely, subject to clarification of the interpretation and enforcement of US law and the impact on financial institutions of this and other related legislation.”
Should activities in the US be suspended, PartyGaming will focus on developing its existing markets outside of the US as well as new markets and products. The group will also seek to re-align the cost base to accommodate the changed business environment.
“This development is a significant setback for our company, our shareholders, our players and our industry. While US horse race betting, state lotteries, fantasy contests and certain other online gaming activities have been exclusively protected under the new law, we are disappointed that the popularity and skill of poker in particular have not also been specifically protected,” commented Mitch Garber, Chief Executive of PartyGaming.
Sportingbet, which generates 62 per cent of its income in the US, said that while it is still unclear what will be included in the regulations and procedures to implement the Unlawful Internet Gambling Enforcement Act of 2006 and how this may or may not be enforced against non-US corporates, should the company\’s non-US international banking partners determine that the Act has been applied to them, then Sportingbet would no longer be able to take deposits from US residents and this would have a material impact on the company\’s trading performance. As a result of the passing of new law, Sportingbet has also discontinued any discussions with regard to a potential offer to buy World Gaming.
888 Holdings said the new legislation indicates Congressional intent to treat internet gaming, whether sports related or not, as illegal. In addition, it is the first federal measure to address internet gaming explicitly. This represents a significant development in the US legal status. In light of these considerations, 888 announced that it will stop taking bets from US citizens or residents as soon as the legislation is signed into law by the President. Whilst suspension of US activities will have a material adverse impact on results for this year and beyond, the company will continue to pursue a strategy of building its brand and business in markets outside the US, which during the first half of 2006 accounted for around 52 per cent of the group\’s net gaming revenue.
Empire Online said that at present it is difficult to assess the exact effect of the new legislation, which could have a material impact on future earnings.
Fairground Gaming Holdings, whose subsidiary Spin Palace generates approximately 70 per cent of its revenues from US players, said it intends to proceed with appropriate caution in evaluating opportunities for further geographical diversification.
Playtech said that if the legislation becomes effective there would be a material impact on certain of its licensees and therefore on company\’s revenues. However, in the first half of 2006 more than 50 per cent of Playtech\’s revenues were derived from non-US players, a figure that is steadily increasing as the company continues to add new licensees in Asia, Europe and South America.
Excapsa announced that it will continue to grow and develop in line with its stated strategy of introducing new games and expanding into new markets. The company, which currently attracts approximately one-third of its new customers from outside of the US, has $47 million of cash available to support this strategy.
World Gaming, whose shares\’ price was also hit by the announcement of discontinued discussions with regard to a potential offer by Sportingbet for the online gaming software provider, said that once enacted the new legislation may have a material adverse impact respecting ongoing operations.
Leisure and Gaming, which yesterday lost over 70 per cent of its market value, said that it would be monitoring the situation closely, adding that it was continuing to take legal advice on the impact of this decision on the company.
BWin, which generates 22 per cent of its gross gaming revenues on the US market, although it does not offer any sports betting products to US residents, noted that the Act, if signed into law, is likely to have a material adverse effect on the group’s US business.
Betcorp said that while management will take appropriate measures to mitigate its impact, the Act is likely to have a material adverse effect on the operation of the company and its profitability.
Betinternet said that despite its exposure in the United States market is negligible with less than 0.2% of its active sportsbook customers last week being from this region, in light of the passing of the Act, the company has decided to suspend active US accounts and to block the opening of any new accounts from the region. The regional focus of Betinternet remains in the Far East, where approximately 60% of its current active clients are located.
NETeller believes that the Act may have a material adverse effect on the company\’s US facing business. The Act states that there will be a period of up to 270 days beginning on the date of the enactment for the US Federal Reserve and the US Attorney General to prescribe regulations requiring each designated payment system to identify and block or otherwise prevent or prohibit restricted transactions. NETeller said that when such regulations will be stipulated, the company will have a clearer view of who will be affected and how those companies will be expected to comply. In the meantime, the online payments provider will remain focused on developing its business in line with its stated strategic objectives including geographical and product diversification.
FireOne stated that the enactment of the Act will have a significant negative impact on the business and results of operations of the company.
IQ-Ludorum noted the new legislation is expected to have an adverse impact on the group\’s provision of gaming software and gaming specific services. Nevertheless the company believes to have a flexible business model and a strong balance sheet, which should enable it to adapt to changing circumstances.
CryptoLogic, whcih recently announced its move to Ireland, said that effective immediately licensees of WagerLogic, the company\’s licensing subsidiary, will not take wagers from US-based players. The software provider spent the last five years preparing for this eventuality by shifting its revenue base to fast-growing European markets. The company is now positioned for long-term profitability and growth. “Since 2001, CryptoLogic has been shifting its business to Europe, and our record revenue and earnings in 2005 and 2006 to date flow from our success in the markets that embrace Internet gaming,” said Lewis Rose, CryptoLogic\’s President and CEO. “While the new U.S. developments will be a challenge for the industry, our company\’s diversification, strong balance sheet, thriving European customers and potential new business in emerging markets enable us to face the future with confidence.” With more than 70% of its licensees\’ revenue now coming from outside the US, CryptoLogic is one of the industry\’s most geographically diversified businesses. The company also enjoys a very strong balance sheet with $126 million in cash, $91.7 million in net working capital and no long term debt.
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