The alleged plans don’t seem to have given Portugal’s existing online gambling monopoly Santa Casa de Misericordia de Lisboa pause regarding its recent appeal court victory over Bwin. Not satisfied with Bwin being forced to cease all advertising with and sponsorship of Portuguese sports franchises, Santa Casa is seeking €27m (plus interest) in damages from Bwin. Santa Casa also expects to use the Porto Tribunal da Relação decision as precedent to go after the 30 other online gambling outfits doing business in Portugal, with BetClic Everest the most likely candidate to next face Santa Casa’s wrath.

Santa Casa’s European affairs adviser Ana Paula Barros told Gambling Compliance that the company had “legal claims against all the national and international operators of whom we have knowledge of and which are awaiting the conclusion of this claim from Santa Casa against Bwin.” Bwin, for its part, isn’t conceding anything, counting on a reversal when its case reaches Portugal’s Court of Second Instance later this year. Barring that, Bwin is also counting on the European Commission declaring Santa Casa’s monopoly invalid. A Bwin spokesperson claimed Santa Casa had “never qualified” that €27m figure.

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Then, on Dec. 29, the bettor received €11k from bwin – about 80% of the bettor’s balance – but still no explanation. Justin7 stresses that bwin is ordinarily very good at dispute resolution, but says they really “dragged their feet” on lowering that damn drawbridge this time. After another month or so, one of bwin’s pages was dispatched with a message for Sir Justin:

This user’s account has been permanently closed as we have reasons to believe that she is part of a betting syndicate … our grounds for suspecting this is identical bets to one or more accounts all placed within a few minutes of each other … The [€2432] is the winnings from these identical bets.

Justin7 humbly highlights the myriad alternative conclusions to Bwin’s syndicate evidence – multiple bettors responding to a forum post, a tout issuing a pick, a random universe – but suggests that even if this was a syndicate jumping on a weak betting line, voiding bets after an event generates all the wrong kind of publicity.

Which segues rather uneasily into this next item. Kids love themselves some iPhones. Lots of great apps coming out every day. Like Talking Tom, starring an alley cat you can punch (tap the screen) in the face and stomach until his dick hits the dirt. But don’t worry, kids: Tom always gets up. (No, Bobby, you can’t try this on your sister.) Even better, Tom has great ears and will repeat anything and everything you say to him, no matter how vile and degrading, with a smile on his puss.

You can also give him glasses of milk, which he heartily enjoys. You can even kit him out with a wardrobe, like the fetching Real Madrid shirt in the above screen shot. But since the in-app “funny money” price tag on said kit equates to a few unfunny real world dollars, kids might need to ask their mom for a lil’ help. And so long as we’re asking questions…

Mommy, what’s a bwin?

Uh oh…

At some point soon, some angry parent is going to send bwin a strongly worded letter, and we humbly suggest bwin doesn’t let four months go by without offering up a response. In the meantime, we consider this a sad commentary on the wafer-thin online gambling profit margins to be found behind the European markets’ walled gardens. Is it really any great surprise that hard-squeezed public gaming companies have been reduced to marketing to toddlers? How else will bwin.party afford that enormous marketing budget? Still, so long as bwin’s a little bit pregnant, why not continue priming this demographic? How does a ‘Tinky Bwinky’ campaign grab ya? (The purple subliminally reminds people of PartyGaming!) It might not do the company any good at the moment, but the numbers for Q3 2030 are gonna kill analysts’ forecasts!

See ya in the future, kid!

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Bet24 and Scandic are the first of seven licensees to be announced for Ongame’s Danish poker network. eGR reports both sites, which already have sites on the network’s dot.com network, will move to dot.dk domains when the market opens on January 1. Martin Lerby, head of marketing and operations at Ongame, told eGR these two sites would be joined by five more “in the next week or so.” Scandic was taken on by Sportingbet earlier this year whilst Bet24 recently signed up WSOP bracelet winner Jesper Hougaard in readiness for this market opening.

In the sunnier climbs of Spain, the French Revolution is attempting to infiltrate the country’s soon-to-be regulated market. According to eGR, Groupe Bernard Tapie, the prospective owners of Full Tilt Poker, applied for a preliminary general licence just before last night’s midnight deadline. Tapie’s group hired a local lawyer from DLA Piper to lend a hand with the application. There were a further 12 applications handed in on Monday while eight forms were given to gaming authorities yesterday. Among those submitting applications were Gtech G2 and Microgaming and it brings the total to around 30 to 35 companies. The official number will be released later today. It’s believed that applicants will find out next week if they’ve been successful.

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While admitting “there is no guarantee that online gaming will ever regulate in the US,” Ryan says his “focus” remains on America. When pressed, Ryan is realistic that the only way a foreign company like his will ever get to play in any regulated US market will be as a technology provider only. He also finally admits that there is a good chance (this site and most others who understand this issue consider it a certainty) that poker will be rolled out state by state and not federally. But Ryan comes off the rails when the subject turns to the $105m settlement PartyGaming paid the US Department of Justice to apologize for having accepted bets from US citizens pre-UIGEA.

Ryan apparently feels the DoJ settlement has lowered the US drawbridge for his new company, but he’s forgetting that the company that settled with the DoJ has since grown another head. Bwin.com took bets (sports bets, in particular) from US citizens pre-UIGEA, just as PartyGaming did, but Bwin never reached a PartyGaming-style settlement with the DoJ. Ryan and Bwin.party co-CEO Norbert Teufelberger appear to believe PartyGaming’s settlement works like a plus-one invitation. Sorry, but this is America. Nobody rides for free, and in the eyes of US law, the Bwin.party merger means we now have a company that hasn’t settled, not one that has.

Additionally, American law requires license-holders to be of good character. No doubt the DoJ is all too aware that Teufelberger was arrested for operating an unregulated and illegal online gambling site in France in 2006. At the time, a Bwin spokesperson admitted that the site knew it was operating in violation of French gaming laws. A German appeals court recently told Bwin that it was operating illegally in Germany – and had been for years — but as Germany represents Bwin’s biggest revenue stream, Bwin continues to insist the law has it all wrong. So the DoJ will likely add ‘unrepentant’ to Bwin’s list of perceived character flaws.

PartyGaming is in a no-win situation here. If the DoJ forces Bwin to make financial penance, then the cost will be borne by Bwin.party shareholders. If, on the other hand, the DoJ lets Bwin off without a penalty (as in the curious case of 888 Holdings), then the $105m of shareholders’ money that PartyGaming surrendered to the DoJ was a completely unnecessary expenditure. With so much invested and absolutely zero sign of any return on that investment, it’s small wonder that Ryan’s focus is on America. Meanwhile, back in London, Bwin.party stock came within a couple pence of its all-time low on Tuesday. What will the dawn’s early light bring Jim Ryan?

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Norbert as a child

Bwin.party digital entertainment(Pwin) has thrown their customary tantrum at being told Germany is a no-go area for them. A spokesperson for Bwin e.K. (Their German Luftwaffe department) explained that, “The ban violates European rules and won’t last.”

The spokesperson then added that, “A regulated market opening is the only way to combat the black market in Germany and to comply with EU requirements.”

Pwin seems to be completely missing the point here (or the German courts are having their fun with young Norbert.) The effect that this ruling will have is likely to be extremely short-lived due to the fact that the current gambling industry treaty expires very soon. This will mean that firms are given a far easier time of it in the market that bwin is thought to garner around a quarter of its revenues from.

The problems that Pwin has experienced over the past year or so usually manifest themselves in the firm’s share price that was again down ever so slightly today by 0.5%. Yesterday, the firm’s share price dipped by as much as 12% as their shareholders got scared of what their next German wurst und sauer kraut might contain. Would you accept food from a pirate though?

Two major financial groups have purchased the Czech lotto firm Sazka. The Prague Post reports that PPF and KKCG bought the firm for 3.81billion koruna, after an official bidding process saw their bid the highest one to be put forward. The lottery firm’s plight first came to light as they failed to pay out winnings to players amounting to 103.4million koruna ($6.1m).

This isn’t the end of the saga though. One of the firm’s major creditors, Česká spořitelna, has asked that the tender be cancelled and a new one held over fears that a legal challenge may be launched against the action of Sazka’s bankruptcy lawyer. A challenge is also being made out of court for Penta, a firm that offered around 5bn koruna outside of the bidding process.

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With the addition of 60 UK and 25 Irish race tracks to its horse racing line-up, bwin has expanded its horse racing offering which will now allow their customers to bet on more than 13,300 additional races a year including classic events such as Royal Ascot, the Cheltenham Festival and the Grand National.

Live video streaming of horse races from tracks in Germany, South Africa, Sweden, U.S and other countries, will now be available to the company’s customers. bwin has also said that with the new expansion of its horse racing offering, all races will be supported with background information, expert tips, statistics and live video streaming coverage.

Stefan Wukovitsch, Section Head Sports Products at bwin.party digital entertainment said in the press release that expanding the horse racing offering was always in the plans: “Since the launch of horse racing at bwin.com in October 2010 we have continuously extended our racing programme…The enhancement with high quality races from the UK and Ireland is the next logical step and will also lead to a higher number of betting options for our users.”

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And then there was Bwin.party (Pwin), which dropped 8.5p (7.39%) to close at 106.5p. Only Rank Group shed more value in percentage terms, falling 10.3p (8.6%). Pwin’s fall erased most of the modest gains the company had made this week, following a week in which the stock hit a historic low of 98.6p on Aug. 10. No doubt the abrupt postponement of a new online gambling law in the German state of Schleswig-Holstein played a role in Pwin’s stumble. But as much as they would like to play pin the blame-tail on die Deutschen, Pwin shareholders really have no one to blame but themselves. Or, at least, the 99.4% of them that voted to approve the merger of Bwin and PartyGaming.

Way back in January, we put the proposed Pwin merger under our microscope, and it was our conclusion that the pairing would not create more value for shareholders – in fact, we found that the opposite was a far more likely scenario. And while nobody likes to say “we told you so”, this graph (pictured right) speaks volumes.

As a standalone company, PartyGaming had a market value of around £1.14b when the intention to merge with Bwin was formally announced in July 2010. By the end of March 2011, when the merger was officially complete, Party’s value had fallen to around £826m. As of August 2011, Party’s 48.4% slice of the Bwin.party pie is hovering below the £500m mark.

Of course, you’d be hard pressed to get the Pwin execs and board members to admit that the merger had failed to create value for shareholders. A KPMG study of the 700 biggest mergers and acquisitions showed that 82% of execs involved in these types of deals were convinced they’d increased shareholder value, despite 83% of these deals having failed to do so. This would be well worth remembering, given the rumors that Pwin was now a takeover target. (Guys, when you’re in a hole, stop merging, er, digging.)

Even before Pwin’s merger was officially announced, the man whose name this site bears predicted that the net result would “not be as powerful in the industry as any of the existing entities are now on a standalone basis.” Calvin also predicted that it was Pwin’s competitors – especially privately held companies – that stood to gain the most from this deal. (Calvin neglected to mention the scheming investment bankers who midwifed this merger mayhem, but that was a given.) And Pwin’s shareholders? Ever wake up with a splitting headache in a grungy motel room to discover both the hooker and your wallet gone? No, us neither.

[An earlier version of this article implied that the chart above represented the market value of both Bwin and PartyGaming, rather than PartyGaming alone. CalvinAyre.com regrets the confusion this may have caused, but it does not alter our conclusion that the merger has devalued both companies.]

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The exact terms of the merger are yet to be released and it comes after the two have worked together since 2008. Both run on the Ongame network that is one of the assets that Pwin is looking to dispense.

Philippe Carli, Amaury Group’s CEO added, “This merger creates a new force in the French market, one that we expect will prosper over the months and years to come. We remain optimistic that the current review of the existing regulatory framework being conducted by the French Government will result in significant improvements to the legal and regulatory framework. In this context, Amaury group is strengthening its involvement with bwin France, one of the sector’s leading operators.”

Across the border in Belgium, Casino770 has partnered with Casino de Spa to launch an all-new site. Available in French, English, German and Dutch the site takes advantage of new laws on the Internet gambling industry in the country. Until recently, the government had full control over the gaming industry. Since January this has changed and land-based casino business owners are able to apply for a license to operate an online site.

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After the case had been lodged, the respondent gave no reply. A sole panelist, Karen Fong, was appointed to look at the case and found:

For the foregoing reasons, in accordance with paragraphs 4(i) of the Policy and 15 of the Rules, the Panel orders that the Domain Names and be transferred to the Complainant.

The release had earlier stated:

According to paragraph 4(a) of the Policy, for this Complaint to succeed in relation to the Domain Names, the Complainant must prove each of the following, namely that:

(i) The Domain Names are identical or confusingly similar to a trade mark or service mark in which the Complainant has rights; and
(ii) The Respondent has no rights or legitimate interests in respect of the Domain Names; and
(iii) The Domain Names were registered and are being used in bad faith.

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Mathias Dahms, Management Board spokesman of JAXX SE, said, “While Germany’s federal states with the exception of Schleswig-Holstein are finding themselves increasingly isolated in the EU because of their protectionism, Belgium is yet another good example of how a market for gaming can be regulated sensibly and liberally – without stifling the emergence of competition in its infancy or neglecting sensitive topics such as player protection and gambling addiction. We are delighted to be able to compete in the Belgian market with such an outstanding brand as myBet.com.”

JAXX still has a vested interest in the country it’s based, Germany. As such, myBet became the official sponsor of the nation’s handball team ahead of any changes that are put in place.

From now on, those that enjoy poker on their mobile devices will be able to access bwin’s Ongame poker app on Android. Previous only available to iPhone customers, Google’s OS will feature the game as bwin looks to exploit the OS’s growth.

Berthold Kao, Product Manager for mobile at Pwin, said, “Android was always the next step for us after launching the world’s first real-money poker app for iPhone six months ago. The real-money iPhone app that we developed with Ongame has been a tremendous success, and we also believe that the Android app has significant potential. Building a mobile application is not just about format and technology. Delivering a mobile application that appeals to the mass market requires you to reinvent the whole poker experience.”

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“We are proud to announce the Euroleague Basketball agreement which represents a perfect match to our long lasting relationship with FIBA, the world governing body for basketball. This makes bwin an even stronger brand as we will now cover both club basketball with the Euroleague and the national teams through our FIBA partnership,” said Norbert Teufelberger, co-CEO of bwin.party digital entertainment.

Jordi Bertomeu, president and CEO of Euroleague Basketball added, “It is a big step for Euroleague Basketball to welcome bwin as partner until 2014…The most important basketball competition in Europe now gets the most important sports betting brand, bwin, as a supporter to take club basketball´s popularity in Europe to an even higher level.”

That may be happening very soon in light of the NBA Lockout. Depending on how long the NBA lockout lasts, the demand for more professional basketball could prove to be profitable for the Euroleague. Additionally, with NBA players having the option to play overseas, the Euroleague could potentially land themselves a big NBA name which will also boost the league’s popularity.

Marketing News

As if on cue, Spain’s Grupo Codere has made good on its threats by suing betting outfit bwin and football club Real Madrid in Commercial Court for unfair competition. Codere, which operates 127 bingo halls, 415 sports betting shops and 13 casinos in eight countries, says “aggressive” ad campaigns by bwin and Real Madrid are breaking Spanish law. Codere is asking the court to impose interim measures that would require Real Madrid to curtail bwin-related ad campaigns and sponsorship arrangements. Codere has a particular bone to pick with the Gibraltar-based bwin in relation to their input into Spain’s proposed gaming legislation, saying that the law should not consider “the views of those who … operate online games illegally from their headquarters in Gibraltar, don’t pay taxes in Spain, don’t generate wealth or employment and are not subject to any controls.” Geez, guys… Stop yelling at the Austrians, will ya? They’ve had something of a rough week.

Someone else who had a rough start to their week is former 888 CEO Gigi Levy, who abruptly resigned his post this past weekend. At the time, 888 spokespeople did their best to soften the blow by pointing out that Levy would remain part of 888’s board for at least the next six months. See? It may be a divorce, but at least it’s an amicable split. Now it turns out that keeping Levy’s board seat warm is 888’s way of avoiding an immediate £48.7m payment to Daub Limited, owners of Wink Bingo, which 888 acquired in December 2009. Seems the Wink deal contained a clause that if Levy vanished from 888’s board, the outstanding balance of payment would come due in full. Since 888 only has about £42m cash on hand, they’d need to either hit up Barclays for a loan, or hit the streets in their fishnets and PVC booties and earn what they can on the game. Or they can keep Levy around for what promises to be some seriously awkward board meetings. “So what do you think we should do, Mr. Ex-CEO?”

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Comic Timing Cartoons

Started in Acapulco, Mexico by Enrique Corcuera in 1969, padel tennis is currently most popular in Argentina, Spain, Mexico and other Latin American countries, but now the popularity of the sport may be poised to spread rapidly across Europe and other continents. The sport’s huge popularity along the Costa del Sol in southern Spain has exposed it to a large number of British residents and tourists and the high octane and intensity of the sport are among the reasons for its growing popularity in the UK.

With the Partygaming merger behind them, bwin now becomes the title sponsor and official betting partner for the padel tennis Pro Tour Circuit and will have the circuit renamed as the bwin Padel Pro Tour.

Additionally, bwin will possess exclusive live streaming rights to all bwin Padel Pro Tour events, with more details on the agreement soon to be released in next month’s official press conference.

A live streaming of a padel tennis match does offer an exciting change from the regular sports that are live streamed for bettors, bwin now has a solid offering of the Latin American pastime with plans to provide live streaming coverage of over 20 padel tennis tournaments.

Norbert Teufelberger, co-CEO of bwin.party digital entertainment said in the release “We are very proud that we have become partners of the Padel Pro Tour, a sport which continues to attract more followers in Spain and the rest of the world…It is a fun game, entertaining to watch, and from now on we can experience more emotions watching it by placing bets.”

Javier Ron, Padel Pro Tour’s managing director stated in the release, “We are convinced that the development of this agreement will contribute in a decisive manner to the growth of padel tennis as a sport, and its expansion throughout Europe.”

Business News

Austrian gaming company bwin today released their results for the fourth quarter of 2010 and the full year in what was a mixed bag for the gambling industry behemoth.

Q4 saw all key financial indicators down year-on-year. Net gaming revenues decreased by 6.1% from €109.8m to €103.1m, gross gaming revenues (GGR) dropping by 1.6% from €132.9m to €130.8m, and total revenues down 8.3% from €125.4m to €115m. This meant a result after tax of €5.2m, a huge 73% down from the €19.3m figure in 2009.

The reasons for this varied from GGR being affected by lower sports betting margin and competition within the poker sector, to the main expenditure affecting EBITDA and the result after tax being the merger with PartyGaming and regulation in Europe.

In-play betting and the mobile segment were two places that bwin did see some growth. In terms of mobile, the number of active customers doubled and the success of the iPhone and Android applications meant GGR rose by 66% year-on-year in Q4. Live betting volume was up by 16.8% year-on-year with pre-match volume also up 16%.

Full year results were more optimistic for the firm but the EBITDA was still down 29.5% to €73m compared with the previous year’s total of €102.2m. It means a result after tax of €13.9m, down 69.9% from last year’s total of €46.3m and just goes to show how costly a venture the merger with PartyGaming is turning into.

The results were like a bag of Revels. You like some of them but come across way too many coffee ones for your liking.

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The near unanimous approval at both extraordinary general meetings in January meant that the merger was set in stone and the date when completion is expected is 31 March 2011.

Merger plan requirements have now been met in bwin’s home country, Austria, and the Vienna Commercial Court has entered the new company into the companies’ register.

As stated before, bwin shareholders will receive 12.23 bwin.party depositary interests for each of their bwin shares, which can then be traded on the London Stock Exchange.

When given formal approval by the Supreme Court in Gibraltar the deal will make one of the largest public online gambling companies on the planet and will fuel rumors that they’re looking at a slant at the North American market.

After showing you the exclusive footage of the merger negotiations, and going all Al Gore on the merger documents, the last point to speculate is when are they finally going to choose to ditch the bwin.party moniker in favor of Pwin? You know it makes sense guys!

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Codere is bringing the filing under Spain’s Unfair Competition Law as the company claims bwin and the Real Madrid football team engaged in an aggressive and illegal advertising for games of chance stating,

“has not been previously authorized by the responsible Authority or made subject to any statutory condition, neither is it protected by European Union cross-border laws”.

Do you have permit for that? That’s the question bwin and the La Liga Football club Real Madrid will have to find an acceptable answer for.

According to a statement from Codere’s lawyers, “Authorized gambling operators in Spain are not permitted to advertise or may only do so subject to stringent restrictions and after obtaining authorization from the Authority… Neither are authorized operators able to operate games through the Internet, although they have the necessary technology and expertise to do so, since these games are prohibited in Spain and in some cases may be activities liable for prosecution in the context of criminal law.”

Perhaps bwin didn’t get that part of the law and if they’re found in violation, it could be costly. The complaint launched by Codere is more like a demand to cease and desist all advertising campaigns and it calls for the termination of the sponsorship agreement between Real Madrid and bwin.

Codere isn’t just picking on bwin, they’ve taken the gloves off since jumping into the industry and they’ll be launching suits against all advertising practices they consider questionable in Spain.

Legal News

We already showed you Chelsea’s finances earlier on this month and given the fact the names of gambling companies are emblazoned across the front of many a replica jersey anything financial is of great interest to the gambling industry.

Deloitte today chose to release their much-famed “Money League,” measuring the world’s top 20 revenue-earning teams.

Top of the pile are bwin sponsored Real Madrid at €438.6m closely followed by fellow compatriots Barcelona at €398.1m. As for the remainder of the top ten, four of them are English sides (Man Utd (3rd place), Arsenal (5), Chelsea (6), Liverpool (8)), and in terms of gambling company sponsorship it’s interesting to look at the top 20 as a whole.

Amongst the top 20 there are four who are currently sponsored by an online gambling company, the aforementioned Real Madrid, and BetClic sponsoring Juventus (10), and the French pair of Lyon (14) and Marseille (15).

Also, if you delve into the past of those who make up the top 20, AC Milan (bwin), Tottenham Hotspur (Mansion), and Aston Villa (32Red) have all also had shirt sponsorship from an online gambling firm in the past. This is significant, showing that the industry involvement isn’t just a quick fire thing.

The Premier League has already seen the amount of gambling companies sponsoring shirts stay steady for a number of years and with the ruling in Germany last year it may rise across continental Europe in line with regulation.

Business News

As we originally reveled in out analysis of certain Pwin merger documents, bwin’s Ongame network was likely to be one of the parts they sent to the great Pwin flea market that will be taking place at some point soon. Pwin have now confirmed this to be the case.

eGaming Review’s article quotes a spokesperson from bwin saying, “There will be surplus assets once platforms are unified, and this may be poker. Bwin and Party have strong platforms, and in order to avoid duplication, not all platforms will be needed.

“Ongame may be repackaged, offered to a potential buyer. Partnerships are also thinkable, where they would take an interest. But no deadlines for this have been decided.”

bwin originally acquired the US-facing poker network back in March 2006 around the time the UIGEA was coming in to force, and as we reported last month they may see offloading it as an advantage ahead of any move into the US market. They didn’t take as many pre-UIEGA bets as Party, so haven’t signed a non-prosecution agreement, but the Ongame baggage may give them more reason to worry.

The bwin spokesperson continued: “We believe that the trend to regulation in the US is still there. Even though Democrats do not dominate Congress any more, this does not make it different from our perspective.

“We understand that that the American gaming industry wants online poker regulated, as they want access to that revenue stream. Regulatory developments in the US would raise interest in these assets. But we haven’t yet established any firm deadline, and will look at all options.”

Although there’s no rush to get rid of Ongame, it’s likely that this deal will be struck sooner rather than later – whether it is for cost saving reasons or wanting to make a swifter transition into a regulated US market.

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Cuban learned this fact midway through the last decade, when his attempts to start a sports gambling hedge fund ran afoul of the National Basketball Association’s head office. Nowadays, Cuban advises anyone who’ll listen that “the stock market is for suckers” and that people “should put [their] money in the bank.”

The stock market’s whole rationale, at least, the one that CEOs trot out when their actions need defending and/or bailing out, is that listing provides companies with the necessary capital to grow their business. That may have been true in the 1960s, when the average holding period for stocks was eight years. Nowadays, the average stock is held for just nine months. Still, that’s a veritable lifetime compared to automated high-frequency trading (HFT) firms, some of which hold a stock for an average of nine seconds.

This Friday provided a good example of the market’s short-term focus and the (over)reaction to relatively insignificant news. Bwin and PartyGaming shareholders voted to approve the merger of their two companies, and the stock of each party immediately went up 5%. (Not enough to make up for their losses since the merger was announced, but still…) Why this enthusiastic response from the market to what was essentially a formality? Did anyone really anticipate either of these company’s shareholders would reject the deal? Or did some HFT computer scanning the financial wire detect the names of these companies in conjunction with the word ‘approve’ and automatically began issuing ‘buy’ orders?

A limited investor attention span compels execs at public companies to take an equally limited outlook on their business plan. Their entire focus becomes beating the street’s estimates for next quarter’s results. If those estimates are beaten, the execs collect performance bonuses (often in the form of stock options), further diluting the company’s value.

This short-term focus has entered the realm of farce. As part of their economic meltdown post-mortem, a US Senate banking committee surveyed 400 companies’ chief financial officers. Eighty per cent of these execs admitted that they’d be willing to cut R&D spending if it would result in an improvement to their immediate bottom line. These guys behave like Guy Pearce in Memento, except instead of being limited to a 15-minute window, they can last a whole three months before their memory is wiped clean and they start over fresh. Given this revelation, it would seem that the chief aim of going public has very little to do with growing a business; instead, the intent is to allow a small core of company principals to cash in their investment while the going’s good.

Perhaps this is why Calvin Ayre is so adamant that the public company model is the wrong one for the online gaming industry. It’s hard enough building a strong company without having (a) jittery investors picking away at your company from the outside, and (b) equally short-sighted execs undermining your company from the inside. Wait a minute… Um, what were we just talking about?

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