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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Inside Gaming: Amaya poised for NASDAQ listing, but its Web gaming products still beyond reach

8 June 2015

On Monday, American stock speculators will be able to buy shares of Internet gaming giant Amaya Inc. on NASDAQ.

Meanwhile, American online poker players still can’t place wagers through the company’s most popular product.

So go the trials and tribulations of Montreal-based Amaya.

After spending $4.9 billion last summer to acquire Rational Group — the parent company of PokerStars.com and Full Tilt Poker — Amaya has become an important fixture in Internet gaming. And the company wants to expand its footprint.

Last month, Amaya said it would team with sports wagering group GVC Holdings and will submit a bid to acquire global online gaming operator bwin.party digital entertainment.

The dual listing on an American-based stock exchange (Amaya is already traded on the Toronto Stock Exchange) is happening almost four months ahead of company predictions. It also gives Amaya, which will have the ticker AYA on Nasdaq, a slice of positive news following reports this spring that its purchase of PokerStars and Full Tilt is the subject of an insider trading investigation in Quebec.

“Amaya has always been confident that it would be cleared of any wrongdoing,” Eilers Research gaming analyst Adam Krejcik said. “Gaining a listing on a major exchange like the Nasdaq sends a message to investors. On a level, it signals that things are OK on the regulatory front.”

Amaya CEO David Baazov told Canada’s Globe and Mail that the NASDAQ listing “will provide greater visibility and better liquidity for our stock and help broaden our shareholder base.”

What would also help is earning a seat at the American Internet gaming table.

Amaya has a deal to launch a PokerStars website in New Jersey in conjunction with Resorts Casino Hotel in Atlantic City. Part of the deal includes a PokerStars-branded poker room inside the Boardwalk casino. During quarterly earnings conference calls in March and May, Baazov predicted a launch by the fall.

Amaya already supplies online games to several Atlantic City casinos. PokerStars has been an issue after its previous ownership paid $731 million settlement to federal prosecutors in 2012 to make criminal and civil illegal online gaming charges disappear.

Amaya’s purchase of Rational Group was viewed as a cleansing action for PokerStars, which operated illegally in the United States until 2011. Outside the United States, PokerStars and Full Tilt control 66 percent of the global online poker traffic. A New Jersey website would immediately attract more players.

New Jersey approval seemed imminent last fall, but regulators never took up the license application.

In February, reports surfaced that New Jersey Gov. Chris Christie blocked PokerStars approval as a favor to Las Vegas Sands Corp. Chairman Sheldon Adelson, an Internet gaming opponent and an influential Republican Party donor. Christie, a likely 2016 presidential candidate, used one of Adelson’s private jets for a Middle East trip. Christie’s office denied the allegations.

“Persistent and unexplained licensing delays have made it clear that there are no guarantees for PokerStars in the Garden State,” Krejcik wrote in an investor report on the company last month. “Should the licensing hurdle be cleared, the financial upside is limited.”

Last year, New Jersey’s online gaming revenue was $122.8 million, according to the Gaming Enforcement Division, far below lofty predictions of most analysts. Poker, Krejcik said, is just a small portion of the New Jersey landscape.

“PokerStars will compete for that meager market against already established competitors that include a regional poker power (Borgata Online Poker) and the dominant U.S. poker brand (WSOP.com - New Jersey),” he said.

California offers another port of entry into the United States.

There are two competing online poker bills — one that allows PokerStars and another that sidelines the company under a “bad actor clause.” Last month, PokerStars brought two of its best-known professionals, Daniel Negreanu and Jason Somerville, to Sacramento to demonstrate online poker for lawmakers and the media.

Krejcik isn’t banking on California.

“The sum is a year that could easily end without regulation,” he said. “And 2016 would face similar hurdles plus the inertia of an election year.”

The potential for Amaya in the United States is the creation of a social gaming casino platform and entry into the daily fantasy sports market. Both products would put the company in front of American consumers. Amaya is also developing online casino and online sports betting models to be launched in markets outside the United States.

Amaya has a market capitalization of $5 billion to $6 billion. Krejcik said shares increased 326 percent after the PokerStars transaction. He called Amaya “the largest i-gaming company in the world by enterprise value.”

The company sold smaller products — slot machine maker Cadillac Jack, and online gambling platform providers Ongame, Chartwell and Cyrptologic — to concentrate on operating and expanding its Internet gaming brands, which includes PokerStars and Full Tilt.

“Rational Group’s revenue and cash flow generation are nothing short of spectacular and it’s easy to see why it has long been considered the crown jewel of the online gambling world,” Krejcik said.

Amaya’s competition in the United States is Gibraltar-based 888 Holdings and Caesars Interactive Entertainment, which owns WSOP.com and several social gaming platforms. However, neither is traded in the United States markets although Caesars Interactive is part of Caesars Growth Partners and will eventually be folded back into Caesars Entertainment Corp.

Amaya will eventually give American investors exposure to all facets of Internet gaming.

The only question is how much exposure American gamblers will have to Amaya’s products.
Inside Gaming: Amaya poised for NASDAQ listing, but its Web gaming products still beyond reach is republished from iGamingAffiliatePrograms.com.