Online Gaming Stocks: A Look into PartyGaming

Article composed by pro gaming writer, Tom Somach

Looking to buy casino stocks online? Before we get started it should be noted that most gaming stocks are traded on the London Stock Exchange. But if you’re ready to buy stocks, try etrade.com. They have global trading. The LSE also operates what is called the Alternatives Investments Market (AIM). This is where Neteller trades when it’s not being delisted for legal problems.

Very few online casinos are traded on Nasdaq. One of the only ones I know of, off the top of my head is the World Poker Tour-poker site of their company. Only sites that don’t accept US players will be on Nasdaq. The Financial Times Stock Exchange is the second biggest spot where online gaming stocks are traded. They are commonly referred to as the Footsie 100 or FTSE 100.

There’s no sure thing in the stock market, as every stock you buy is a gamble, to some degree. And it’s especially true with gambling-related stocks, as the recent volatility of some of them has demonstrated. The stock values of companies that run actual casinos in Las Vegas and elsewhere, have been relatively stable of late. The same can’t be said, however, for the recent stock values of companies that run online casinos.

Some of those have dropped like lead weights in a deep pond. The reason? Anti-online gambling legislation that was passed last year by the U.S. Congress and that caused many online gambling sites to stop accepting US online poker players and gamblers. The Unlawful Internet Gambling Enforcement Act, or UIGEA for short, prohibits financial entities such as banks and credit card companies from processing payments to and from online gambling sites, effectively making it much harder for Americans to gamble online.

Party Poker was once the most popular and financially successful Internet poker room in the world, with a majority of its customers coming from the U.S. After UIGEA passed last fall, Party Poker banned customers, and then promptly lost most of its overall business, which caused the company’s stock to lose more than a billion dollars in value.

Officially, PartyGaming PLC, the parent company of Internet poker room Party Poker (www.partypoker.com), announced earlier this year that its annual net profits for 2006 were down a whopping 56% from what they were in 2005. The company blamed the drop-off on anti-online gambling legislation that passed last year and forced Party Poker to abandon the market, which was most of its business. They also blamed large acquisition costs on gaining new players from non-US markets. Great amounts of CPA (Cost per acquisition) was paid out to poker affiliates to generate these new players.

Its annual net profits for 2006 were $128 million, down $165 million or 56% from the $293 million in annual net profits the company recorded in 2005, PartyGaming officials said.

Another company that banned customers from playing online poker didn’t suffer as bad a fate as Party Poker, but by the same token wasn’t breaking any revenue records either. Read more about 888 Gaming Stocks.

Article by Tom Somach