Gaming Stocks Rally on DOJ News

December 28, 2011
Gaming Stocks Rally on DOJ News

Gaming stocks were among the best stock market performers on the first trading day since an email from the Justice Department to Senate Majority Leader Harry Reid was made available to the public.  This email stated that the Wire Act only applied to sports betting.  This was a change in opinion from the Justice Department as it was previous believed that their stance was that the Wire Act covered all interstate gambling that was not specifically granted an exemption by other legislation.  Many industry observers agree that this gives the green light to interstate online poker.

The news sent gaming stocks soaring.  It was a broad gaming stock rally.  Casinos, slot manufacturers and companies tied to online gaming saw their stock prices rise by as much as 14%.  Casino companies Boyd Gaming (BYD), MGM (MGM) and Wynn (WYNN) all saw large stock price increases with Boyd Gaming seeing a jump of close to 10%.  Las Vegas Sands (LVS) got left behind by the rally; only seeing a 1% gain.  Sheldon Adelson, Chairman and CEO of Las Vegas Sands, came out against online poker recently.  Adelson stated that he was morally opposed to online poker which may have left investors wondering if Las Vegas Sands would become involved in any online gambling.  Las Vegas Sands owns Venetian and Palazzo.  Caesar’s Entertainment figures to be a major player in online poker with their World Series of Poker brand which already offers real money online poker in the UK.  Their company is not publicly traded though so there is no stock price to report.

Slot and shuffle machine manufacturer Shuffle Master (SHFL) saw their stock price rise to its highest price in four years.  Shuffle Master owns patents on several table games including Three Card Poker, Four Card Poker, Caribbean Stud, Blackjack Switch and Let it Ride.  If states legalize online casino games, these online casinos are certain to buy licenses to offer these games to their players.  International Game Technology (IGT), a slot manufacturer who has applied for an online poker license in Nevada, saw their stock price flirt with a 52 week high as well after closing up 5% today.  IGT owns the online poker network Entraction which specializes in the European market.

Pokertek (PTEK) saw their stock price soar nearly 15% after being up as much as 66% intraday.  Pokertek manufactures heads up and multi player poker machines where players play against each other.  Everything about their product is identical to an online poker game with the exception of being able to see players fact to face.  Their electronic poker tables are typically found in jurisdictions where actual cards are not allowed by law.  These locations include Madison, WI and Cherokee, NC.  They can also be found on many cruise ships.  This allows the cruise companies to have fewer employees on board.  Investors are banking that Pokertek will be able to use this technology online.

Many European stock markets are still on Christmas holiday. Many online gaming companies are traded on European stock markets.  When stock markets fully open in Europe, it will be interesting to see what kind of gains some of those companies see or if investors will be cautious.  Some investors feel that overseas operators may be shut out of the U.S. market.

While this rally in gaming stock prices could be short term, moving one step closer to online poker in the U.S. is certainly great for all of these company’s long term profits.  Sentiment is changing in the U.S. towards online poker and these companies are poised to take full advantage of internet gambling in the future.  Investors were betting today that these gaming companies will profit in the near future off of online gambling.

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