“Online Poker Companies Provide Tempting Investment Options”

Online poker is more popular than ever before. Partly due to strong marketing campaigns surrounding events like the World Series of Poker and the Travel Channel’s World Poker Tour, thousands of players are logging on to online poker sites every day to test their luck and skill.

PartyGaming – arguably the online poker industry’s most successful operator – has enjoyed phenomenal success as a result of the poker boom. The company listed on the London Stock Exchange for the first time on June 27 with an initial share price of 116 pence. By close of business on the same day, the PartyGaming share price had risen to 129 pence. Recorded profits of $391 million on a total revenue of $600 million in 2004 – a net margin of 58 percent – has ensured the PartyGaming success story has gone from strength to strength. Already after the first quarter in 2005, Partygaming’s profits were at $128 million based on $222 million in revenue.

The successful performance of Partygaming as a public company has encouraged many other online poker operators to go public also. Industry analysts report that the online gaming industry has staggering growth potential and there is little indication that the industry has yet peaked.

However these uncertainties also create negative aspects for online poker companies and for their potential investors. While most analysts believe that online poker and online gambling in general are here to stay, some caution that the entire industry may be based on a passing fad. Understandably this news can create concern among investors keen to make money with online poker operators but reluctant to take uncalculated risks.

The more sobering concern however involves the ambiguity surrounding online gambling legislation in the United States. Many poker companies like PartyGaming rely on the gambling habits of United States residents for the bulk of their revenue. Potentially if PartyGaming founding members were to visit the United States, they could be arrested under sections of the country’s gambling legislation. Although this is a highly unlikely scenario, a PartyGaming statement on this issue notes that “PartyGaming and its directors rely on the apparent unwillingness or inability of regulators generally to bring actions against businesses with no physical presence in the country concerned.”