Not even the barrage of negative press about the world's biggest online poker group PartyGaming could prevent it from starting to trade some 9% above its flotation price.
The float which raised £907m for the group means that PartyGaming is now valued at more than £4.64bn: that's sufficient to cover its books more than twice over. And it also means that PartyGaming will be launched straight into the FTSE 100 after the next index reassessment meeting in September.
So just how good an investment is PartyGaming? For all the risks involved, there are ultimately only two things that matter, says John Foley on Breakingviews.com. Firstly, whether online poker is legal, and secondly, whether it is merely a fad.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The question of PartyGaming's legality is already "adequately reflected" in its valuation, says Foley. As it is, its shares trade at a big discount to online groups such as eBay, and PartyGaming should succeed growing its earnings by over 30% a year, despite carrying a market multiple of only 13.
Whether online poker is merely a fad is a more serious question. The group makes its money purely from online poker, mostly in the US unlike sites like Sportingbet, which also offers sports betting amongst others. Yet with online poker "currently enjoying phenomenal growth rates", even if PartyGaming were to get just half the 44% growth predicted for the market per year for the next four years, it would still be good.
But there are snags, says Lex in the FT. With so many users, there is the possibility that a number of online poker rooms will start popping up, which in turn would drive down margins. If anything, PartyGaming has helped to enlarge the category, while "network effects appear too weak" to put the competition out of business. So many money-making machines will no doubt catch the eye of tax authorities and regulators.
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrencyAccording to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
-
Investing for children this Christmas – five ideasIt might not come with a shiny ribbon, but an investment fund could be the gift that keeps on giving. We share five ideas if you are investing for children this Christmas.
