Editor's note (October 3, 2006) - Click here for an overview of the Unlawful Internet Gambling Enforcement Act's impact on the stock price of Party Poker and the rest of the industry.
Online poker is a multi-billion dollar industry that is growing at a phenomenal rate.
Barrons reported that online poker rooms rakes in $2 billion per year. Online poker revenues may reach as high as $6 billion by 2009, according to analyst predictions published by the New York Times.
To put that figure in perspective, the combined annual revenue of all the casinos on the Las Vegas Strip is $5 billion per year.
This tremendous growth spurt means investing in poker stocks may be a great bet. Here is a list of the top online poker companies investors may want to ante up on:
Party Poker (PartyGaming)
London Stock Exchange: PRTY- Party Poker became a publicly traded company on the London Stock Exchange in June, 2005. Party Poker's £1.14 billion stock-market flotation was the biggest IPO in the UK for more than five years. Its shares rose 11% on the first day of trading.
- Party is expected to enter the FTSE 100 index. After the successful IPO, the company "is now worth more than some of the oldest and most famous names in British business, notably Sainsbury's, EMI, Rolls-Royce, British Airways, ICI and ITV" (The Guardian)
- Party Poker's chief executive Richard Segal was the head of Odeon Limited, Britain's leading operator of movie theaters. Party Poker's chairman Michael Jackson was the chairman of the Sage Group, a large British software company.
- Party Poker accounts for more than half of the worldwide poker market.
- Party's IPO prospectus warned about the risk of criminal and civil proceedings in America, notably from the US Department of Justice, which regards gambling over the internet as illegal.
- Party Poker reported $600 million in revenue and $350 million in profit in 2004.
World Poker Tour (WPT Enterprises & Lake Entertainment)
Nasdaq: WPTE, Nasdaq: LACOE- Based in West Hollywood, California, WPT Enterprises produces the World Poker Tour, one of the highest rated shows on the Travel Channel. The company currently generates most of its revenue from licensing its TV program.
- WPT Enterprises is 64%-owned by Lakes Entertainment. Lakes has contracts to operate several Indian casinos due to open in 2006.
- WPT Enterprises will launch its own online poker website in the second quarter of 2005. This website will not be accessible by U.S. residents.
- "The promise of an online poker site backed by a powerful brand -- and with a business model similar to eBay's -- makes up the bulk of WPT's prospective value, firmly supporting the company's $300 million-or-so market cap." Analyst Jeff Hwang, reporting for the Motley Fool.
Paradise Poker (Sportingbet)
London Stock Exchange: SBT.L- ParadisePoker.com is operated by Sportingbet, a British company traded on the London Stock Exchange and listed on the U.S. pink sheets.
- Sportingbet's share prices nearly triple after it acquired Paradise Poker. Online poker accounts for 40% of Sportingbet's profits and most of its earnings growth in 2004. Sportingbet is currently valued at £870 million ($1.6 billion).
Ladbrokes (Hilton Group)
London Stock Exchange: HG.L- Ladbrokes is owned by the British hotel giant Hilton Group. Hilton Group employs over 84,000 staff in 80 countries worldwide and has a market value of nearly $10 billion.
- Ladbrokes, the world's largest bookmaker, owns 2,000 retail betting shops across the UK, Ireland and Belgium. Its internet presence includes Ladbrokespoker.com, Ladbrokes.com and Ladbrokescasino.com. These three gaming sites have over 600,000 registered customers in 160 countries.
- Gambling makes up 60% of Hilton's revenue. 10% of that gambling income comes from online gambling.
World Series of Poker (Harrah's Entertainment)
NYSE: HET- Harrah's owns the right to the World Series of Poker (WSOP). It plans to start a poker website based on the WSOP, though the site will not be available to U.S. residents.
- Harrah's owns the following casinos: Horseshoe (the original home of the WSOP), Rio (the current home of the WSOP), Harveys, Showboat, Bally's, Flamingo, Paris, Caesars Palace, and the Grand Casino.
- Poker only accounts for a small percentage of Harrah's revenues. Therefore the success of the WSOP and the online poker website will not greatly affect Harrah's bottom line.
Empire Poker (Empire Online)
London Stock Exchange: EOL- Empire Online is a marketing group which directs new players to online poker and casino websites, principally Party Poker and Casino-On-Net (888.com), two of the largest gambling networks in the industry. Empire Online earns an ongoing commission for every player it refers.
- As of March, 2005, Empire Poker has signed up 144,000 new real money players to the Party Poker network.
- In 2004, online poker-related income represented 67% of Empire's revenue. In 2005, the number increased to 77%. Empire's directors expect the poker-related revenue to constitute an increasing percentage of the company's annual income.