PartyGaming falls from FTSE as Empire seeks refuge
Mon Oct 9, 2006 2:32 PM BST
By Pete Harrison
LONDON (Reuters) - Online gaming firms continued to suffer on Monday from a looming U.S. ban as World Gaming fought for survival, Empire Online said it would invest in safer lines of business and PartyGaming was earmarked to exit the FTSE 100 index.
World Gaming asked the London Stock Exchange to suspend its shares shortly after the open "due to a fundamental uncertainty over its ability to continue trading".
Not a share trade but surely this is gonna cause a few problems!
The group said last week it might be in technical default of its loan conditions after the U.S. Congress approved a bill making it illegal for companies to accept bets over the Internet or for credit card companies to make payments to online gambling sites.
The bill has been passed to President George W. Bush to sign into law, which the industry views as a certainty.
Several European firms said they would quit the United States, triggering a share price crash that has wiped nearly $7 billion off company values.
The compilers of the FTSE said they would drop sector leader PartyGaming from their list of 100 leading shares after it lost 63 percent of its value last week to reach about 1.7 billion pounds.
Evolution Securities also issued a note on the sector downgrading PartyGaming's shares to a "sell" rating from a "buy", saying they were overvalued at the current levels. They were down 0.6 percent at 41-1/4 pence at 1319 GMT.
"PartyGaming will be one of the most adversely affected operators regarding the U.S. online gaming ban," Evolution analyst Tejinder Randhawa said in the note.
SAFE HAVEN
Rival 888 will be dropped from the FTSE 250 to make room for PartyGaming.
But its shares rose 1.4 percent to 106-1/2p after Randhawa flagged it as a possible acquisition target as gaming companies rush to consolidate to achieve cost savings in the wake of the ban.
Sources close to Empire Online said the group was looking outside the online gambling sector for ways to invest its $250 million cash pile. Empire shares were up 0.5 percent at 50p.
Empire gained the money in February by selling its Empire Poker division to PartyGaming to end a legal dispute, and much of it has been earmarked for acquisitions.
Empire said on Monday its chairman, Leonard Steinberg, would step down from the end of October to be replaced by Richard Rosenberg, a senior independent non-executive director.
The company gave no reason for Steinberg's departure, but it follows legal action against numerous executives in the online gaming industry.
David Carruthers, chief executive of London-listed BETonSPORTS, was arrested in July while travelling through Texas. He was then fired, while U.S. authorities indicted the company on charges of failing to pay billions of dollars in excise taxes.
Sportingbet has banned staff from travelling to the United States after Chairman Peter Dicks was arrested at New York's JFK Airport last month on charges in Louisiana of "gambling by computer". He was freed after New York State refused to extradite him to Louisiana.
And last month, French prosecutors detained the two heads of Austrian betting firm Bwin.com to investigate alleged violations of gaming laws.
- the question can also be taken more generally and apply to other stocks in similar positions...