Outlook for online gambling IPO plans not promising
16.05.2006After the optimism generated by several major successful Initial Public Offerings on the London market, there may now be a gloomier outlook the UK newspaper The Telegraph reported this week.
The report claims that corporate finance houses are trying to hold their nerve – and retain their fees – but hard-nosed institutions are certain to demand cheaper valuations if they are to back new issues in current conditions.
"This is where quality counts," said one corporate financier. " Good, soundly run companies will probably be able to maintain their valuations, but investors will be very wary of supporting highly speculative issues with a less convincing story."
Meanwhile, reports that the second largest online poker operation, Pokerstars is moving toward an IPO in London continue to do the rounds. And the more recent news that the Mohawks who run the Kahnawake jurisdiction are thinking of a stock exchange investment also brought the possible marklet problem into sharp focus.
Pokerstars is reportedly in the process of preparing to float on the London stock market before the end of this year with an early value estimate of GBP 1.1 billion according to The Sunday Times. The Israeli owned firm has been exploring an outright sale in recent months and is understood to be in talks with a number of investment banks regarding either a sale or a listing.
More recently, the Mohawks of the Kahnawake First Nation Enclave in the Quebec province of Canada are reported as considering involvement in a London share offering that would raise money for an international network of computer centres to serve the online gambling industry and other e-businesses.
The Kahnawake economic development commission expects to finalise an agreement as early as this week to take a 40 percent stake in an Isle of Man company looking to issue shares on the London Stock Exchange's AIM.
The commission owns Mohawk Internet Technologies, whose computer servers have made Kahnawake one of the world's most popular jurisdictions for hosting online gambling sites. MIT, home to scores of casino, poker and bingo sites, is negotiating a contract that would see the Isle of Man company - Continent 8 Technologies PLC - offer its servers to international customers as part of a larger "grid" of data centres.
Questions other than the viability of the market have arisen, too, one being whether Kahnawake residents could legally invest in their own company.
"The Mohawks would literally be a part, through their economic development commission, of an international publicly traded company. And we think that's pretty interesting," said Continent 8 chief executive Michael Tobin, a long-time consultant to MIT.
"If the Mohawks don't participate, they've missed a great opportunity," said Tobin, who would like to see the deal go forward within the next few months.
Mohawk grand chief Michael Delisle said the Kahnawake council supports the IPO as an important economic development opportunity for the community.
Money raised from the Continent 8 share issue would be used to develop data centres for servicing fast-growing demand, including a second centre on the Kahnawake reserve and others in Singapore, the Isle of Man and elsewhere, Tobin said.
That would mean the Mohawks would become an international player in servicing online gambling and other e-commerce businesses.
Those businesses, including the Mohawks' current customers, are anxious to have backup locations in different jurisdictions around the world for their online operations, Tobin said.
