I-Gaming Stocks May Avoid Market Reaction

Hotel, casino and online travel stocks were hit hard Monday, the day trading resumed for American stocks.

Combined, the companies of those industries lost nearly $10 billion in market capitalization yesterday. American stock markets had been closed since Sept. 11, the day terrorist attacks were carried out on the World Trade Center in New York and the Pentagon.

One analyst, however, thinks that Internet gambling stocks might escape the fate of other leisure industry stocks. John Dutton, president of the independent research firm J.M. Dutton and Associates, said online gaming stocks may dip a little, but probably won't see the same losses as brick-and-mortar casinos--most of which are tied to the airline and hotel industries by virtue of being travel destinations.

"I think the I-gaming stocks enjoy a degree of relative safety compared to their land-based brothers," Dutton said, "and I think that perhaps in Europe you'll be able to differentiate between the effect of the Internet sites versus their land-based [casinos]."

The top four gaming stocks in the United States, MGM Mirage, Mandalay Resort Group, Harrah's Entertainment Inc. and Park Place Entertainment Inc., collectively lost $2.4 billion in market capitalization during Monday's trading, Reuters reported.

MGM Mirage's shares fell most sharply of the four, tumbling 22.3 percent to $22. Mandalay stock closed down 20.5 percent at $19. Park Place's shares decreased by 19.4 percent to $8 and Harrah's shares were down 14.3 percent to $24.60.

Internet gaming stocks that trade on the Nasdaq had varying reactions, but many were down on the day American stocks resumed trading. CryptoLogic and dot com Entertainment Group both closed lower on Monday, Sept. 17, than they did the previous Monday. CryptoLogic closed at $19 on Sept. 10 and $16.05 on Sept. 17. Similarly, dot com closed on Sept. 10 at $2.07 and on Sept. 17 at $1.55, although its volume had doubled since Sept. 10.

In the four remaining week days after the attack, stock markets around the world plunged. In Asia, stocks fell as fears that the terrorist attacks on America would damage the already hurting U.S. and Japanese economies. European markets opened Sept. 12 slightly higher after having seen prices tank the previous afternoon. According to the news Web site ZDNet Australia, the Australian Stock Exchange traded normally the day after the attacks.

"The foreign markets last week were really just trading aimlessly, waiting for the American markets to get back and get direction," Dutton said.

Dutton said consumer confidence, which will play a key role in how quickly the U.S. economy rebounds, is likely to affect whether Internet gamblers continue to spend their money at online casinos. He said the numbers he's seen so far indicate that I-gaming stocks will have only minor decreases.

"There's always debate on how much of gaming is really discretionary," he said. "While it all comes from discretionary income, if you take a hundred gamblers, and they have a feeling their income may be impacted, I'm not sure how many of them would in fact pull back their spending habits. They might cut back a little bit."

Another factor to consider, Dutton said, is that during the past week and in upcoming months, gamblers and all other types of consumers might be so absorbed by current events that they lose interest in leisure activities, however much of an escape those activities might provide.

"I certainly think Thursday through Friday there was a drastic diversion," he said. "It started coming back Saturday, the behavioral patterns. There's no question that people are affected."