- Major Atlantic City companies MGM, Boyd and Caesars all see surges in their share price following Governor Christie’s conditional veto Thursday.
- Online businesses, from Zynga and Amaya to bwin.party and 888, also see significant gains.
The largest gambling brands in New Jersey, including MGM, Boyd and Caesars, enjoyed a rare day in the sun Thursday as their shares leaped upwards on the news that online gambling should soon be legal in the Garden State.
Governor Christie’s conditional veto requests only minor alterations to the online gambling bill, and is expected to result in approved legislation that should see online poker legalized as early as September.
If the Nevada experience is a good guide, it could still be eighteen months before operators start signing up players, but the markets appear to have decided that this is excellent news for the whole gaming industry with double-digit bumps for many gambling firms.
And it was not just the US brick-and-mortar groups that saw upticks in share prices. Online companies Zynga, bwin.Party, 888 and Amaya all saw double digit gains up to 20%. UK listed companies William Hill, Betfair and Playtech moved up around 5% each.
Online poker market leader PokerStars, privately owned, welcomed yesterday’s developments in New Jersey. The group has entered into an agreement to purchase an Atlantic City casino, though the deal is pending license approval.
MGM and Caesars are in dire need of some positive news, their current financial position being extremely weak after the financial crisis reduced their revenues alarmingly.
Last year Caesars’ earnings barely covered interest costs on its $20b of debt. MGM is not in much better shape, with two thirds of its earnings going to service its $13b of borrowing.
In a serendipitous coincidence, there is an extra bit of good news for MGM from New Jersey’s Division of Gaming Enforcement: it has indicated it may reverse its decision to force MGM to sell its share of the Borgata casino in Atlantic City.
The Borgata is the top revenue generating casino in Atlantic City and is co-owned by MGM and Boyd Gaming. New Jersey regulators insisted back in 2010 that MGM had to sell its share. They were unhappy with MGM’s partner in Macao, Pansy Ho, whom they thought, according to Bloomberg, “should be deemed unsuitable under state law based on her family’s history of organized crime ties.”
The network of online/brick-and-mortar casino relationships is becoming very tangled, but all of these companies have positioned themselves to take advantage of a new legal framework for online poker in the US. They all expect to reap real financial benefits as more states allow internet gambling.
Even with the general effect of Governor Christie’s decision taken into account, the market’s response does seem exuberant; though New Jersey is the most densely populated state in the Union, and has the third highest median income at $70k, its population of just under nine million is not going to generate the profits that the market is pricing in.
Governor Chris Christie is a powerful Republican. He delivered the keynote address at the 2012 Republican National Convention and at the age of 50 looks poised to be an influential figure in the party for many years to come. There are plenty of rumors that he may even try for the Republican Presidential nomination for 2016.
If the rest of the Republican Party follows his lead, then the future is bright for US online poker and perhaps the market’s exuberance is rational.