Boom and bust?

One of the over-riding factors behind this weekend’s shenanigans must surely be the recent performance of shares in companies with online poker arms, and in particular the performance of Party Poker. In June 2005, Party Poker was floated on the London Stock Exchange, with shares valued at 116p. By yesterday, those same shares were valued at 71p. That’s not the sort of performance you might expect from the leading light in a market with such phenomenal growth over the last 24 months by any means, but in some ways it hasn’t been a total shock. In 2005, the number of active online players has not risen as fast as in 2004, and in the second quarter of 2005, it barely shifted. There have been growing mumblings over the summer about the short-term slowdown, and about the long-term prospects of the online poker market. As a result of these, shares, including Party’s, have suffered. Empire Online, owners of Empire Poker, possibly the most successful Party skin, has seen its value drop dramatically of late. In September there was talk of Sportingbet buying Empire Online. At the time EOL was valued at around £800 million. At today’s price, you could snap it up for less than half that value.

And so, last month, PartyGaming issued its first profits warning, just three months after floating. This, I read, is not a good thing to do. Questions have since been asked about the quality of the IPO, and the willingness of the company’s owners to cash in while the going was very, very good. Among the reasons cited are the late airing if the WSOP on US TV, and the revelation that not only is Party finding it harder to recruit new players, but it is earning less from each of its players than it used to. Perhaps this isn’t surprising in a market where phenomenal growth has been achieved at the expense of a range of pretty tasty customer sweeteners, ranging from sign-up bonuses, through rakeback deals, to almost constant reload bonuses, the combined effect of which has been to effectively allow break-even players to earn tidy money from online poker, while those in the dark about the best sweeteners gradually get bored and switch on to something different.

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Tags: Poker, Party Poker, Empire Poker