Invest in online casinos?
How much more of a gamble
has it become to own shares in online casinos? Will the online
casinos industry make profits in the future or decline? Will the
online casinos industry rebound? What is in store for new online
casinos or mainstays looking for an edge in the ultra
competitive online casinos industry?
The questions have intensified since one of the top online
casinos stopped working in the United States after the U.S.
Justice Department charged the online casinos firm and current
and former executives with operating an illegal gambling
Online casinos Investors and online casinos industry analysts,
who have long said that owning shares in online casinos involves
serious risk, nonetheless expressed surprise at the move by the
prosecutors. They say the development, coupled with legislation
in Washington that could clamp down further on the industry, has
created new cause for concern.
And yet investors keep coming.
The indictment of a top online casinos firm prompted a big
sell-off in the shares of online casinos, but the sector has
rebounded. Some industry analysts even call this a buying
Greg Harris, an industry analyst for Canaccord Adams, a British
investment bank, said that many investors seemed undaunted by
what they saw as American bluster that cannot stop the industry.
"You can throw a lot of things to scare them, but there are
still guys finding value," Harris said of investors bullish on
online casinos. He said that he, too, believed some Internet
gambling stocks were inexpensive now, thanks to panicked
That sentiment is not universal. The online casinos firm case
has raised questions about whether other companies might soon be
in the Justice Department's sights, industry executives and
"None of us know whether this indictment is specific to (the
firm) or a sweeping attack against online gaming per se," said
an executive from a publicly traded online gambling firm who
requested anonymity because company lawyers told him not to
comment to the press. "We're keeping our heads down."
There are indications that some major investors, including U.S.
investment houses, are beginning to distance themselves from the
online gambling companies, either by selling shares or by
ceasing to provide analyst coverage.
Neteller, a company used by many online gamblers for payment
processing and one seen by some as an industry bellwether, was
at 597.50 pence on July 4, fell to 319 on July 20, and is now at
The day the indictment was unsealed on July 17, trading in the
firm was halted after a 17 percent slide in the shares. Kevin
Smith, a company spokesman, said that he thought it could be
more than a month more before the London exchange reopened
trading. Trading has not resumed.
I. Nelson Rose, a professor and expert in Internet gambling law
at Whittier Law School in Costa Mesa, California, said he had
recently been contacted by major institutional investors trying
to decide how to deal with the risk and volatility.