March 28, 2006
AIM, the London Stock Exchange’s market for emerging international companies, saw one of its largest IPOs Tuesday as Playtech made its public debut, valuing the software maker for online casinos at nearly $1 billion.
Based in the British Virgin Islands, but with roots and a tech team in the Baltic nation of Estonia, seven-year-old Playtech began trading at $4.50 per share, raising $55.6 million. Brisk trading reflects investor confidence in the rapidly growing online casino market and marks Estonia as one of the few countries to emerge from the old Soviet bloc with a vibrant IT economy.
Online gambling is estimated to be a $700-billion market worldwide, according to Terrie C Walker Consulting in Atlanta, and Playtech has enjoyed its share of the profits. In 2001, the company had only two licensees for its software. That figure has grown to 39 licensees serving 94 online casinos, 15 online poker sites, and 15 online bingo sites. Playtech’s profits have grown to $35.6 million in 2005 from $8.3 million in 2003.
Internet gambling sites like PartyGaming, which debuted on the LSE last June at a value of $8.46 billion, have watched profits soar as broadband access grows in Europe, Asia, and the United States.
In 2004, PartyGaming had an average daily revenue of $1.7 million. That number rose to almost $3 million in 2005: And this despite a murky regulatory environment that makes online gambling officially illegal in some countries including in the United States.
With a population of 1.3 million and a per capita gross domestic product of $17,672—the highest of the Baltic states—Estonia is building a name for itself as an island of IT in an otherwise depressed region. Although it is owned by eBay and headquartered in Luxembourg, Internet phone company Skype also has its origins in Estonia.
While Playtech has joined the rest of the online gambling community and incorporated on a balmy island with favorable tax laws and no prohibitions against online wagering, the company got its start in Estonia. Playtech now counts Bet365, SportsInterAction, and land-based Intercontinental Casinos as customers.
The IPO was also good news for AIM. Startups raised $4.02 billion on AIM in 2004, up from $1.83 billion in 2003
RED HERRING – The Business of Technology – March 28, 2006