Investment Bankers say a "fair" value on PartyGaming IPO is $8.85 billion.

Wednesday, June 15th, 2005

Nils Pratley
The Guardian

PartyGaming will today cut the value of its flotation after hitting deep scepticism among London fund managers about the original price tag of up to $10bn (£5.5bn).
City sources say the online poker company will set its value at $8bn to $9.2bn, leaving the final price to be decided after detailed presentations to institutional investors.

Dresdner Kleinwort Benson, the investment bank sponsoring the float, has been stung by fund managers' concentration on doubts about the legality of online gambling in the United States, home of most of the players on PartyGaming's website, Party Poker.

Analysts at ING - a member of banking consortium promoting the float - even failed to justify a $10bn price.

ING put a "fair" value on PartyGaming of $8.85bn and what it said were as many as six "main" categories of risk to investors. These included the standard concern about United States senators' attempts to ban online gambling but extended to worries about increased competition, collusion by online poker players and even the risk of money-laundering through the Party Poker website.

ING also attached a heavy qualification to its estimate: "We caution that valuing such a company is a difficult exercise, given its very high growth profile and the unstable regulatory environment."

Scepticism among fund managers runs deeper. The most scathing analysis was made by a manager who is generally regarded as among the top five most respected in London. As is usual, he did not wish to be identified. He argued that PartyGaming should not even be a candidate for flotation. "I wouldn't touch this float, not even with a very long and disinfected bargepole," he said.

"I have a real problem with investing in a company where 85%-90% of its revenues come from the US, where the legal status of online gambling is vague, or at least open to doubt and interpretation.

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