Shares in online gambling companies listed in London lost more than half
their value immediately after a dramatic move by US authorities to ban
Internet betting.
The market was taken by surprise when the US Congress unexpectedly rushed
through the Unlawful Internet Gambling Enforcement Act on Saturday, dealers
said.
Meanwhile, US casino owner Harrah’s Entertainment Inc. said that
private-equity firms Apollo Management and Texas Pacific Group made a buyout
bid of $15.05 billion, or $81 per share. It would be the biggest deal ever
for a casino operator and the fifth-largest leveraged buyout in history. US
President George Bush is expected to sign the anti-gambling bill into law
this week. It would make it illegal for finance companies to collect
credit-card payments from customers using Internet gaming sites. The online
gaming business last year generated around 15 billion dollars globally, but
faces deep opposition from US lawmakers. “It is extraordinary how many
American families have been touched by large losses from Internet gambling,”
said US Representative Jim Leach, the bill’s main sponsor in the House, in a
statement after its passage on Saturday. Critics label the ban “the new
prohibition,” referring to the spectacular failure last century by the US
government to ban all alcohol. But whether the ban eventually succeeds or
fails is of little current interest to the market. “This has come as a major
shock to the industry, where most observers expected the legislation to
fail,” said Stephen Ford, an analyst for broker firm Collins Stewart. “It
also comes as a major shock to the stock market and unsurprisingly stock
prices have fallen significantly across all online gaming stocks exposed to
the US.”
The Harrah’s bid, called “aggressive” in a Wall Street Journal report,
reflects a 22 percent premium on Harrah’s closing stock price Friday. By
mid-morning trading Monday, the firm’s shares rose 14.27 percent, or $9.48,
to $75.91.
Harrah’s lists more than $12 billion in equity and more than $10 billion in
debt. The company reported $7.1 billion in revenue for 2005.
