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Shares in UK-listed online gaming companies suffered further sharp falls on Tuesday, as the sector continued to suffer from the surprise move in the US over the weekend to make it illegal for banks and credit card companies to process online gaming payments from the US.
PartyGaming shed another 9.5 per cent to 40¾p, after it said it was cancelling its maiden interim dividend following its decision to suspend all gaming business with US players.
The fall in PartyGaming’s shares came on top of a 58 per cent drop on Monday and means that the group is likely to drop out of the FTSE 100 next week when GUS, the retail conglomerate, splits into two blue-chip companies.
World Gaming shares fell nearly 40 per cent at one point on Tuesday after the group said the proposed US changes meant that it might be in technical default of its loan conditions. The shares later recovered slightly to stand 28 per cent lower at 11p.
Sportingbet, which fell 64 per cent on Monday, was down 5.7 per cent at 62¼p, while 888 Holdings , which dropped 26 per cent on Monday, was 4.4 per cent lower at 103½p, compounding its 26 per cent fall of the previous day.
The falls in London were echoed in Sydney, where shares in Australia’s leading online gaming companies also plunged.
Nigel Payne, Sportingbet chief executive, on Tuesday warned that UK and other European Union governments must support European online gaming sites if they wanted the industry to survive.
Describing the US clampdown as “overt protectionism.” Mr Payne told BBC radio that while the operators had the technological ability to continue trading in the US, “without tangible support from UK government or the EU, then carrying on is much more difficult. We need [their support] but both the EU and the UK are disappointingly silent on the matter.”
Mr Payne said that due to technology and the number of small players, the industry was too vast to police. There were many ways for companies to get around the legislation, he said, adding that “banks around the world do not take the same view as US banks do of the industry, or American legislature.”
Sportingbet, whose former non-executive chairman Peter Dicks was recently detained in the US as the crackdown on gaming began, said it was in the process of reviewing its strategy.
The heads of two of the biggest online gambling sites on Monday had predicted internet gambling companies faced a wave of consolidation in the wake of the US clampdown.
Mitch Garber, chief executive of PartyGaming, told the Financial Times that he expected the pace of the pace of consolidation to quicken, with MGM and Harrah’s, which built their gaming empires around the fully regulated Las Vegas casino industry, likely to step in.
Mr Garber said: “I wouldn’t be surprised if they [MGM and Harrah’s] didn’t have an interest in winning non US-facing companies as a means of tipping their toes in the internet world. I know MGM and Harrah’s well, and I think they have always acknowledged that internet gaming companies will move ahead in time and watched with great interest to see the success,”
He said he expected PartyGaming to be involved in buying up companies likely to suffer heavily from the impact of the new US legislation. “We are very focused on mergers and acquisitions. I see our liquidity as being very attractive to smaller players who may not be able to survive on their own.”
PartyGaming said on Tuesday that its decision to scrap its dividend would “allow the company to take advantage of the many attractive opportunities in the sector that will emerge over the coming months.” Cancelling the payout will free up about $115m.
One banking adviser in the sector said: “This is going to create a round of consolidation but what format and nature and how broad is a different matter.”
Gigi Levy, who takes over as chief executive of 888 later this year, said consolidation would happen first between online operators in order to restore the high margins lost by the US debacle, followed by takeovers by big onshore operators coming from both the US and the UK.