Las Vegas Sun

March 29, 2024

Poker site sets big IPO price

PartyGaming Plc's initial public offering, London's largest since 2003, valued the Gibraltar-based online poker company at 4.6 billion pounds ($8.5 billion).

The IPO was priced by investment bankers today and is expected to begin trading later this week. The company has capitalized on the popularity of poker through www.partypoker.com, considered the world's largest poker Web site.

"This puts PartyPoker, which is entirely a virtual company, in the same ballpark as the largest casino companies in the world," said Tony Cabot, a Las Vegas-based gaming attorney who has authored several books on Internet gambling.

Internet gambling didn't immediately take off but has survived the dot-com bust and "proven itself to be a very profitable industry," Cabot said. Even so, concerns about the federal government's ban on Internet gambling in the United States may hold prices back a bit, he said.

The value of the IPO is already more than the market capitalization of several major Las Vegas casino giants including Harrah's Entertainment Inc., Boyd Gaming Corp., Station Casinos Inc. and Wynn Resorts Ltd.

MGM Mirage, Nevada's largest casino operator, has a market cap of $11 billion.

The company's owners sold shares for 116 pence apiece, below the middle of the 111 pence to 127 pence range offered to investors, to raise 907 million pounds. The stock was scheduled to begin trading at 8 a.m. in London, according to a statement on the U.K.'s Regulatory News Service today.

Investors are betting that online gambling's popularity will outweigh any potential regulatory problems. The operator of the PartyPoker Web site makes 87 percent of its revenue in the U.S., where the Justice Department considers the business illegal. Revenue almost quadrupled last year and the PartyPoker site has gained active players every quarter since 2001.

"The stock has been reasonably priced," Julian Chillingworth, a fund manager who helps oversee $15 billion at Rathbone Brothers Plc in London, said last week. Investors "have to weigh up what you think the chances are of some form of legislation restricting U.S. citizens from actually playing online poker."

The sale price values PartyGaming at 24 times 2004 earnings, compared with an average price-earnings ratio of 19 for the stocks in London's benchmark FTSE 100 Index.

Dresdner Kleinwort Wasserstein, which managed the sale, has an option to sell as many as 115.3 million more shares in a so-called over-allotment. If exercised, that would bring the total raised in the sale to 1.04 billion pounds.

Online gambling stocks have been soaring. The stock of Sportingbet Plc, a London-based competitor that makes about 60 percent of its revenue in the U.S., has gained 78 percent this year. London-based Sportingbet went public six years ago and now has a market value of 1.1 billion pounds.

"The listing will reinforce the group's position as one of the world's leading online gaming companies and enhance the group's profile as we seek to expand internationally," PartyGaming Chief Executive Richard Segal said in today's statement.

PartyGaming, started eight years ago, is now worth more than British Airways Plc, Europe's third-biggest airline, and Dixons Group Plc, the U.K.'s largest electronics retailer. It is also eligible for inclusion in the FTSE 100 Index.

Revenue, of which 92 percent comes from fees for poker games on its site, rose to $601.6 million in 2004 from $153.1 million in 2003. Net income more than tripled to $348.5 million from $77 million. The net profit margin was 57.9 percent in 2004.

All of the money raised from the IPO will go to the company's owners and to a trust set aside for the company's 1,100 current employees and future workers.

Anurag Dikshit, 33, the group operations director who joined in 1998, is the company's largest shareholder with about 40 percent. Other investors include Vikrant Bhargava, 32, group marketing director, and Ruth Parasol and Russ DeLeon, a married American couple who live in Gibraltar and serve as consultants to the company.

Today's IPO is the largest in London since Yell Group Plc raised 1.2 billion pounds in July 2003, according to data compiled by Bloomberg.

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