Gambling companies shares have known better and worse times. It seems that lately there are more worse than better times for the likes 888 Holdings Ltd (888.L), Playtech (PTEC.L) and Party Gaming (PRTY.L) – all leading companies in the gambling industry, all traded in the London Stock Exchange, and all experiencing a plunge to their shares in recent months.
January 2010 was a good month for 888 Holding share price. It has reached a high of 120p. Now almost one year later the company’s share price is standing on 43p (25/10/2010). Almost third of its previous value. Not good news for the owner of 888 Casino and 888 Poker leading sites.
Playtech share was also in an upright position in the beginning of the year. It went up and up until it has reached a high of 540p on April. Then it started a painful deterioration all the way to a November low of around 390 – almost 30% its April value.
Same story, different company. Party Gaming, owner of mega poker brand Party Poker reached a high of 334p on March 2010. It’s now standing on 238p after losing almost 30% of its value.
The reasons for this are not entirely clear. The most reasonable explanation for the phenomena is the global economic climate and world wide recession. These have hit the online gambling industry and affected its revenue and profitability. It’s not to say that any of the gambling companies is losing money. But by the gambling industry standard the companies’ financial results are unsatisfactory.
Regulatory developments in various markets also have a negative impact on the gambling companies. Countries like France enforced increased taxations, thus impacting the profitability of the companies, and forbad online casinos operations, thus harming their revenues.
And of course the potentially biggest market in the world - the US has a crucial impact on the gaming companies. Currently the 2006 UIGEA (Unlawful Internet Gambling Enforcement Act) forbids any online gambling in the US. Most online gaming companies obey the law. The ones that operate in the market (Poker Stars, Full Tilt Poker etc.) enjoy huge income and a significant advantage over their competitors. In the already difficult global market their competitors struggle against their favorable cash reserves and resources.
The recent American election which saw Barack Obama suffer heavy losses and lose of the power of Congress to the Republicans are not good news to the gambling industry. This means that the Democrats, which are known to be much more tolerant versus the gambling industry will have a much harder time pushing laws through and it could even spell an early sign that the end is near for Democratic rule in America.
It remains to be seen how the gambling giants will deal with these financial and political challenges. But with millions of online customers and millions more potential customers it is quite certain at this point of time that the gambling industry has not said its last word.