SPORTINGBET AT THE CROSSROADS

(684) (12-October-2006)

With the President's signature imminent, the question is sell, close, suspend....or go for it

The Guardian newspaper continues to follow the misfortunes of Sportingbet plc this morning (Thursday) as the presidential signing into law of the Unlawful Internet Gambling Enforcement Act looms closer in the United States.

Having announced that it had received approaches from possible buyers, but that any sale was "unlikely [to] realise significant cash consideration," Sportingbet seemed faced with some stark choices for its US-facing operations, which generate most of its revenues.

The company can sell, suspend or close US operations and try to rebuild its considerable fortunes in other online gambling markets, or take the more unlikely and, for a public company risky option of continuing to accept US business from those players who find a way around the financial stranglehold that the Act seeks to impose.

The Guardian claims that Sportingbet derives almost two thirds of its business from America, and says about 300 jobs are at risk in London, Australia, Asia, Costa Rica and Antigua.

The suitors who have thus far approached Sportingbet are understood to be private companies in offshore locations, including the British Virgin Islands and Costa Rica.

Sportingbet also confirmed yesterday that Investec had quit as its financial advisor, with sources suggesting that the bank had decided to cut all ties with internet gambling. It will be replaced by Daniel Stewart & Co, which advised the company on its Ofex listing in 1999.

The Guardian reports that analysts feel the approaches to Sportingbet illustrate that the American ban could drive internet gambling underground. One said: "Public companies are getting out because they would risk being charged with money-laundering or aiding criminal activities. But they will simply be replaced by faceless private companies whose ownership will be impenetrable."

Meanwhile Bodog.com , of Costa Rica, owned by Calvin Ayre, the Canadian billionaire, said that it would continue to take American bets.

The Times newspaper seemed to be of similar mind, commenting:

"Instead of being able to play poker or have a bet on a college football game on a website owned by a public company adhering to strict standards of conduct and financial probity, his [Senator Bill Frist - the main mover of the US legislation] constituents will be entrusting their money to faceless private companies based in offshore locations such as the British Virgin Islands.