Legal worries cloud PartyGaming poker float
Thu Jun 16, 2005 11:59 AM ET
By Steve Slater
LONDON, June 16 (Reuters) - PartyGaming shares were under pressure in unofficial trading on Thursday amid investor concern about the regulatory risk facing the online poker giant, which is set for a multibillion-dollar share float later this month.
Spread-betting company IG Index said its price range for PartyGaming's shares had slipped to 110-118 pence, while Cantor Index's price was 112-115p, both towards the lower end of PartyGaming's indicated price range of 111-127p per share.
The weakness came a day after the company issued its prospectus which said the company's directors risk jail if U.S. moves to clamp down on online gaming are successful.
"There is a significant risk that criminal or civil judgements may be sought against the group of directors," PartyGaming said in its prospectus for the initial public offering (IPO) in London.
"If successful, such actions may result in remedies such as injunctions ... fines and imprisonment."
PartyGaming said 87 percent of its players are based in the United States, where the legality of online gaming is a grey area.
The Gibraltar-based company does not have a physical presence in the United States, but it does advertise and receive funds from payment processors there.
U.S. LEGAL ISSUE
It said any disruption to its relationships with partners such as banks, credit-card companies or payment processors could affect its business, and said as payment processing has become more tightly controlled it had experienced "some difficulties" in processing payments to and from its customers.
"Accordingly, payment processing costs and bad debts may increase as a proportion of the group's revenues in the future, and the group may experience increasing difficulties in advertising," it said in the section of the prospectus dealing with risk factors.
One legal expert said the high-profile flotation was likely to bring the legal issue in the United States to a head.
"If the U.S. are going to do anything, they will feel pressured to take action with this case, so watch this space as it could navigate the future of online gaming," said Paul Telford, online gambling expert at international legal practice Allen & Overy.
"The U.S. enjoys one of the biggest casino industries in the world so it will obviously be looking to protect that industry -- but how far will they go?" he added.
"If this IPO goes through and the U.S. doesn't pursue them, there are plenty of successful online gaming companies watching from the sideline and, if successful, they will see this as an opportunity to do the same thing."
PartyGaming plans to raise between 996 million pounds and 1.139 billion pounds ($2.08 billion) in the flotation on June 27, most of which will go to the company's four founders.
The share sale will value the company, which operates the partypoker.com Web site, at between 4.4 billion and 5.1 billion pounds, below previous expectations partly due to the regulatory uncertainty. Anurag Dikshit, group operations director, is the biggest shareholder with a stake worth at least $3 billion. Other major shareholders are Vikrant Bhargava, its marketing director, and other co-founders Ruth Parasol and her husband Russ de Leon.
Thu Jun 16, 2005 11:59 AM ET
By Steve Slater
LONDON, June 16 (Reuters) - PartyGaming shares were under pressure in unofficial trading on Thursday amid investor concern about the regulatory risk facing the online poker giant, which is set for a multibillion-dollar share float later this month.
Spread-betting company IG Index said its price range for PartyGaming's shares had slipped to 110-118 pence, while Cantor Index's price was 112-115p, both towards the lower end of PartyGaming's indicated price range of 111-127p per share.
The weakness came a day after the company issued its prospectus which said the company's directors risk jail if U.S. moves to clamp down on online gaming are successful.
"There is a significant risk that criminal or civil judgements may be sought against the group of directors," PartyGaming said in its prospectus for the initial public offering (IPO) in London.
"If successful, such actions may result in remedies such as injunctions ... fines and imprisonment."
PartyGaming said 87 percent of its players are based in the United States, where the legality of online gaming is a grey area.
The Gibraltar-based company does not have a physical presence in the United States, but it does advertise and receive funds from payment processors there.
U.S. LEGAL ISSUE
It said any disruption to its relationships with partners such as banks, credit-card companies or payment processors could affect its business, and said as payment processing has become more tightly controlled it had experienced "some difficulties" in processing payments to and from its customers.
"Accordingly, payment processing costs and bad debts may increase as a proportion of the group's revenues in the future, and the group may experience increasing difficulties in advertising," it said in the section of the prospectus dealing with risk factors.
One legal expert said the high-profile flotation was likely to bring the legal issue in the United States to a head.
"If the U.S. are going to do anything, they will feel pressured to take action with this case, so watch this space as it could navigate the future of online gaming," said Paul Telford, online gambling expert at international legal practice Allen & Overy.
"The U.S. enjoys one of the biggest casino industries in the world so it will obviously be looking to protect that industry -- but how far will they go?" he added.
"If this IPO goes through and the U.S. doesn't pursue them, there are plenty of successful online gaming companies watching from the sideline and, if successful, they will see this as an opportunity to do the same thing."
PartyGaming plans to raise between 996 million pounds and 1.139 billion pounds ($2.08 billion) in the flotation on June 27, most of which will go to the company's four founders.
The share sale will value the company, which operates the partypoker.com Web site, at between 4.4 billion and 5.1 billion pounds, below previous expectations partly due to the regulatory uncertainty. Anurag Dikshit, group operations director, is the biggest shareholder with a stake worth at least $3 billion. Other major shareholders are Vikrant Bhargava, its marketing director, and other co-founders Ruth Parasol and her husband Russ de Leon.
