Internet Gambling Site IPO Excites Investors

On June 27, investors are getting excited as PartyGaming, the world’s leading online poker site, is about to file for its initial public offering (IPO). This online company is being evaluated as one of the biggest listed British firms for the last five years. The listing of 22 percent of PartyGaming’s shares is expected to give the firm cash of $2 billion, resulting in the market value of this company being $10 billion.

The Economist, a British weekly magazine, analyzed in its edition dated June 27 that investors’ exploding interest in PartyGaming reflects the rapid growth of the internet gambling business. Currently about 1,800 gambling sites are operating worldwide. Experts predict that the global internet gambling market, worth $4.5 billion at present, will quadruple to $18 billion in three years.

The unprecedented boom in online gambling businesses results from the fact that women and young people, unwilling to gamble at hotel casinos, are rushing to the online gambling sites. The proportion of women customers is 45-50 percent at online sites compared to 10-15 percent at casinos.

Internet gambling sites make 1.0-2.0 percent of every pot as commission. These online sites which incur no labor costs, unlike hotel casinos, can generate astronomical net profits. Last year, PartyGaming made profits of $350 million out of $ 601.6 million revenues. On the other hand, Harrah’s Entertainment, the world’s largest hotel casino owing Caesars Palace made net profits of less than $700 million out of more than $8.7 billion in revenues.

The United States has absolute status in the global internet gambling market. The U.S., which accounts for 90 percent of all global gambling site users, prohibits internet gambling by law. In 1961, the U.S. passed laws that make today`s online gambling money transactions illegal on the grounds that they loosen morality and cause crimes such as money laundering.

Lately, the U.S. government that has nevertheless almost turned a blind eye to internet gambling, is strengthening regulation, as the damage from it is growing. The U.S. Senate has drawn up legislation designed to prohibit the use of credit cards in money transaction for internet gambling, and internet payment agencies have voluntarily suspended gambling money transactions. Experts say that the growth in the internet gambling market absolutely depends on how strictly the U.S. government regulates it from now on.

Mi-Kyung Jung mickey@donga.com