Online gambling companies sink in London
LONDON (MarketWatch) - Shares in online gambling companies PartyGaming, SportingBet, 888 Holdings and Empire Online slipped once more in London on Monday after published reports that the U.S. government has requested British banks hand over transaction details of their dealings in the online gambling sector.
PartyGaming (PRTY) shares lost 7.3%, SportingBet (SBT) shares dropped 7.4%, 888 Holdings (888) lost 2.9% and Empire Online (EOL) declined 1.7% in the London stock market.
PartyGaming shares hit a high of 179.5 pence in 2005 but were trading at just 28.25 pence on Monday, while SportingBet shares traded at a high of 452 pence last year. On Monday, SportingBet's shares were valued at 34.5 pence.
The report in The Times (of London) newspaper said that subpoenas have been issued by the Southern District Court of New York to a minimum of 16 U.K.-operating banks requesting documents that will help build a case against anyone that could have profited from online gambling in the United States.
The Daily Telegraph newspaper carried a similar report. Banks on the receiving end of subpoenas reportedly include the Dresdner Kleinwort unit of Allianz (AZ) , HSBC Holdings (HBC) , Credit Suisse (CS) and Deutsche Bank (DB) .
"It's a regulatory sentiment issue," said Andrew Lee, a leisure sector analyst at Dresdner Kleinwort. "People are trying to put a value on the risk of the U.S. trying to claw back some money and what impact it might have in terms of sentiment and share price." He noted that so far, actions from the U.S. have been significantly more negative than expected by the market.
The sector slumped in early October when the U.S. Congress unexpectedly passed legislation that will make it a criminal offence to receive funds related to any online gambling activity that is illegal under state or federal law.
Also, several online gambling senior executives and shareholders of these companies have been arrested in the U.S. The latest news on this front came from Neteller (NLR) , which recently requested a trading suspension for its shares after two of its former directors, Stephen Lawrence and John Lefebvre, were detained by U.S. authorities.
Neither of the pair has any current position with or connection to the firm other than as shareholders. Neteller, which is a popular service used to transfer money to online gambling sites, said it has not received any communication from U.S. authorities. The detention follows the arrest of senior officials at BetOnSports (BSS) and Sportingbet in 2006.