Internet poker stocks: know when to fold 'em

Internet poker stocks: know when to fold 'em - at Moneyweek.co.uk - the best of the weeks international financial media.

Poker has changed. No longer the preserve of whisky-sodden old men, anyone with an internet connection can set up an account and pit themselves against fellow enthusiasts from across the globe. And it's Americans who have truly fallen for the online-poker craze, accounting for more than 70% of all players, says Andrew Bary in Barron's. Drawn in by the huge success of TV tournaments such as the World Series of Poker, an estimated 1.7 million players are currently active, with an average of 150,000 people gambling each day, according to PokerPulse.com.

In total, more than 200 online poker sites generate $2bn a year in revenues, equal to 40% of last year's $5bn in Las Vegas. And Britain, too, has become a nation of gamblers, says Ben Wright in The Business. Research compiled by website 888.com, owned by Cassava Enterprises, a Gibraltar-based firm and one of two online gambling companies looking to list on the London Stock Exchange, shows that the number of Britons betting online has risen more than six-fold since 2003. Research by YouGov found that almost 80% of Europe's online players are British.

In the past year or so, a host of small listed companies have made fortunes for investors.  For example, shares in Betinternet.com have surged 77% in the last twelve months, from 8.18p to 14.5p, while Sportingbet - the biggest UK success story - has done even better, jumping more than fourfold from 77p to 334p. Meanwhile, a handful of investors led by Ruth Parasol, a Californian lawyer and web-porn veteran, can expect to realise "mind-boggling" paper fortunes later this year when they float PartyGaming (whose PartyPoker site accounts for more than half the online poker market) in London, says Dominic Walsh in The Times. Other big names include PokerRoom.com, set up in 1999 by two Swedes, and Paradise Poker, bought last autumn by Sportingbet.

But could the poker party be drawing to a close? Nigel Payne, who runs Sportingbet (which earns 60% of its revenue in the US) predicts continuing growth in the poker market of at least 60% a year. But investors would be unwise to bank on such phenomenal growth, and should consider carefully whether all the potential good news is already priced into valuations. One big potential brake on growth is US government regulation. In America, gambling websites tread a "precarious" path amid heavy opposition from lawmakers and authorities, says Amy Yee in the FT. Lawmakers have persistently tried to ban internet gambling on the grounds that it's a gateway for money laundering, under-age wagering and addiction. The Bush administration has made "headway" curbing online advertising of internet gambling as well as credit-card transactions on online gaming sites - with another internet gambling bill in the offing.

Longer-term, mobile-phone gambling looks set to trump them all, says Natalie Hanman in The Guardian. A new report by Juniper estimates that, by 2009, mobile-gambling services will generate revenues of more than $19.3bn, nearly a third of all mobile-entertainment revenues. Java-enabled graphics, colour-filled screens and 3G networking combine to provide a service that rivals traditional gambling methods. But in the meantime, investors thinking of taking a punt on poker stocks should think hard before staking too much.

Recommended

Power your portfolio with renewable-energy stocks
Renewables

Power your portfolio with renewable-energy stocks

The COP26 conference showed that fossil fuels are on their way out. This is a big opportunity for companies developing the equipment and technology th…
3 Dec 2021
Share tips of the week – 3 December
Share tips

Share tips of the week – 3 December

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
3 Dec 2021
Four of the best new ETFs
ETFs

Four of the best new ETFs

The latest exchange-traded funds (ETFs) offer access to themes ranging from infrastructure to smart homes. David Stevenson takes a look at four of the…
30 Nov 2021
Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021

Most Popular

Don’t worry about the global population explosion – it’s unlikely to happen
Investment strategy

Don’t worry about the global population explosion – it’s unlikely to happen

One of the many things we are taught to worry about is the fast-rising global population. But in fact, says Merryn Somerset Webb, the opposite is tru…
15 Nov 2021
Four of the best new investment trust listings
Investment trusts

Four of the best new investment trust listings

Diversify your portfolio and benefit from rising dividends with these four new investment trusts coming to the market soon.
15 Nov 2021
Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021