Online Gaming Stocks - Still RiskyPublished November 8, 2008 by OCR Editor
Once the darlings of the NASDAQ, casino and other gaming stocks have still to find their way into positive territory.
Having been virtually ejected from the NASDAQ and New York Stock Exchange online casino stocks have had a hard ride these past two years.
Most land-based and online gambling stocks are now traded on the London Stock Exchange (LSE). The reasons for this are historical and result from the witch hunt conducted by the US Senate against online gambling companies in 2006. An act of Senate prohibited any US financial institution from transferring funds to online casino and other gambling companies. A secondary market where these gambling stocks are also traded is the Alternative Investments Market (AIM). Only a very few gambling stocks are listed in the USA, and none of these accepts American players.
As with all stock trading, markets go up and down. The dramatic volatility that affected all markets in September 2008 has also hit gambling stocks. Following the dramatic casino stock price falls in 2006, and the global stock market collapse in the third quarter of 2008, gambling stocks have now been left at historically low levels. Stocks of land-based casinos have held up fairly well, but online casino stocks have dumped significantly.
One high profile example of an online casino stock that plummeted to new lows was PartyGaming. This company was the golden child of the Internet gambling market prior to 2006, but the US legislation resulted in the stock losing over one billion US dollars in value. The company's annual profits in 2006 fell from 293 million US dollars to 165 million US dollars, a drop of over 50%.
Lobby groups are pushing for the 2006 law to be repealed, but the future of online gambling stocks remains uncertain.