PartyGaming shares were driven higher today following speculation from a number of brokers that a bill banning online gaming in the US would not be passed into law.
Right-wing interest groups have been pushing for a bill which will have the effect of largely prevented any online gaming in the United States for a number of years now, which would be bad news for thousands of online gaming sites such as PartyGaming, the parent company of PartyCasino and the world’s largest online poker room, PartyPoker. The United States provides the bulk (some analysts designated the US market as generated almost half of
the total online gaming revenue) of the worldwide online gaming market, and success within the United States have seen PartyGaming become a $10 billion company in the space of only five years since launch. The proposed bill would make it illegal for banks and credit card companies to allow payments to online gaming sites.
PartyGaming shares took a nosedive recently when owners of the blue-chip company sold another 10% of their holdings. PartyGaming shareholders were then hit with a 24% loss in value after the US House of Representatives voted overwhelming to pass the gaming bill. Since then, however, shares have been rising steadily and received another boost yesterday when leading stockholders like ABN Amro repeatedly designated PartyGaming shares as a “buy” recommendation. ABN Amro predicted a 160p target for PartyGaming, arguing that the fundamentals of the company remain unchanged, despite the recent heavy share sales by PartyGaming directors. PartyGaming is trading today at 111p, which presents massive value for investors should the ABN Amro prediction prove correct.
Three days ago, the US House of Representatives passed the gaming bill by a majority of 317 to 93, but Morgan Stanley and other brokers believe its unlikely the bill will be ratified by the US Senate.
Despite this, Morgan Stanley was more cautious than ABN Amro with their prediction for PartyGaming – they stuck with their “overweight” designation for the online gaming giant.
PartyGaming is only one of hundreds or thousands of online gaming platforms which will be affected one way or the other by the proposed ban of internet gaming in the United States, but as the largest online gaming company in the world, their rising and falling share price will be a key indicator of whether the proposed bill looks likely to be successful or not.
PartyGaming spokesperson John Shephard said the company was monitoring the situation closely and was hopeful the US government would eventually follow the “sensible and pragmatic” approach of the UK, which has embraced online gaming and the billions of pounds in tax revenue they stand to generate from it.
At the moment, all signs look good for PartyGaming and US-based online gaming players alike as few analysts believe the US Senate will have the time to ratify the bill, even if they wanted to.
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