With the news that Sportingbet has ‘settled’ with the US Dept. of Justice to the tune of $33M, the online gaming company saw its share price rise by 10% in a single day, so we guess the ends justify the means. Of course, nothing has fundamentally changed as far as the company’s operations are concerned, but with the US ‘unpleasantness’ now behind them, speculators are speculating that Sportingbet will be able to get in on that sweet, sweet merger mania, which (they hope) will send the stock soaring even higher. Why does the phrase ‘speculative bubble’ keep popping into our heads?
Spokespeople claim the company did the deal to extract a concession that says nothing will block Sportingbet from being allowed to offer services to US customers, in the event that US gaming law is modified at some future date. Seems almost ‘unsporting’ of Barney Frank to simultaneously chime in with his opinion that internet gaming bill HR 2267 doesn’t stand much of a chance of even coming up for discussion in the current lame duck session of Congress.
HR 2267 was the closest the US has ever come to taking a progressive step towards online gaming law liberalization, and now it seems it’s not even going to be put to a vote. And with the Democrats (the prime movers behind the legislation) widely presumed to emerge from November’s mid-term elections with reduced majorities in both House and Senate — or even being relegated to minority status in one or the other – it seems highly dubious that there will be any legal US online gaming market for Sportingbet to enter.
So if there’s no US market payoff, what did Sportingbet gain from this agreement? Well, the company’s execs no longer need fear arrest if they step off a plane onto US soil, so they can finally take the kids on that Disneyland vacation they’ve been postponing for the last four years. We know $33M seems like a pretty hefty admission price, but for some kids, there’s just no substitute for seeing Donald Duck’s bare ass in person.
But $33M doesn’t actually represent the sum total of what Sportingbet agreed to pay. The company also agreed to ‘cooperate’ with prosecutors in the same U.S. Attorney’s office said to be doing a full scale investigation of Full Tilt Poker and other ‘rogue’ online gaming operators. Sportingbet ‘will provide the government with requested documents and make its employees available to US investigators.’ Then, presumably, these same US investigators will make their detention facilities available to Full Tilt employees.
Calvin Ayre has been very public with his opinion that the public company model is ill-suited for the online gaming industry, and here we have a prime example of a public operator being forced into doing something it otherwise might not have felt necessary had it been a private company. Of course, it’s entirely possible that Sportingbet might have further justified their deal with the knowledge that it could negatively impact a direct competitor. We thought this kind of antagonism towards private operators was confined to Pwin’s Norbert DoubleBurger, but apparently, for public companies, the ends do justify the means.