Paradise not found for SportingBet.
As part of the October 2004 Paradise Poker acquisition deal, SportingBet promised some US$33m in cash and a further 9.7 million shares to the owners of the then top tier online poker room. The main condition of this earn out was that a target of US$150m of operating profit be met. This was reached within two years and the former owners of Paradise were paid. Through their investment company Bonaire, this group of three are now 11% stake holders in SportingBet.
Rewind to September 7 of this year when SportingBet reported that its chairman, Peter Dicks, was detained in New York City on a Louisiana warrant while traveling in the United States on business unrelated to online gaming. The PLC?s stock price took a tumble, but this was just the beginning of the slide. In the final days of September 2006, Senate Majority Leader Bill Frist championed a bill that aimed to outlaw all forms of online gaming in the US. The bill, known as the Unlawful Internet Gambling Enforcement Act of 2006 was broad in its language and contained exceptions for government lotteries. But to publicly traded gaming companies the impact was very clear. The following Monday of the bill being passed, shares in US facing gaming companies on London?s Alternative Index Market lost millions of pounds within the first hour of trading. SportingBet was in that group.
SportingBet saw another black Friday on October 13th, when it announced that it was exiting the US by selling its U.S. operations to private investors for the sum of $1. The company said in a statement that "SportingBet received cash consideration of $1 for the shares and related assets of the U.S. operations, and has discharged excess liabilities amounting to approximately $13.2 million." SportingBet's shares lost over 13 percent just on rumors that it was disposing of its US businesses for such an insignificant sum, valuing the group at 274 million pounds. The bad news continued with a message posted at Paradise?s website that said that they would no longer accept any new deposits of funds or wagers from US citizens. This effecitively reduced the earnings of the once venerable paradise Poker, that SportingBet had paid handsomely for, to less than a quarter.
SportingBet has always been quick to point out that it?s success is due in some major part to its ability to understand and penetrate any target demographic. If SportingBet hopes to re-gain lost ground by looking to Asia and emerging markets to so, they better hope that this is still the case.
posted by Ian of egaming pulse
