Maybe an investment in one of the online poker firms is only right for you if you are a regular user of their products, because it would appear, or so seems to be the wisdom on the markets, that an investment in these stocks is something of a flutter.
Yesterday, it wa ‘â€˜888’s turn to float. Originally the launch share price was slated for between 162p to 212p, but in the end the shares were launched at the lower end of that range, 175p. Even so, it wasn’t the most auspicious of starts with shares down 5p on the day. Still, it could have been a lot worse, at one point shares were down to 162p.
At close of play, market capitalisation was Â£590mn, still enough to make the company’s owners, the Israeli pair of Avi and Aharon Shaked Â£100mn plus from selling a quarter of their 70% stake.
The trouble with online gambling firms is that the valuations are based on an assumption of continued growth – but no one seems to know how much oomph the market has got left in the tank. As Alan Millar, an analyst at Arbuthnot Securities Ltd. in Edinburgh was quoted on Bloomberg site as saying: “Until you’ve been around for six or nine months, with a few quarters of earnings behind you, why should I take it from you that you’re going to grow faster than everyone else?’‘
When party gaming was floated in June, shares surged 8.1%, but then crashed later in the season, as doubts emerged on the company’s future growth – and now the share price is down by a third, and the firm’s capitalisation is Â£3.82bn.
There’s another big risk with investing in online gambling firms- the practice is illegal in the US, and it’s been said that the directors could risk imprisonment if they visit the country.
But, with Gibraltar the hub of the online gambling world – many of the big players are based in the same building, and London the home for their flotations, it’s left to the likes of John Anderson, ’888’s chief executive, to act as the face of the industry. He said of the listing: “There is obviously a lot of volatility in the last few weeks but we are focused on tomorrow. Our owners have sold only 25% of the business and we are driving forwards. We are getting stuck in. You can’t control the market on a day-to-day basis, so we will concentrate on running the business.” He added: “In three to four years I don’t think you will recognise the industry. There will be a handful of big players – and customers who really trust them – and there will be a bigger pie.”
© Investment & Business News 2013