World Gaming falls victim to crackdown

Lack of debt and a strong cashflow have left the online gaming industry ripe for consolidation, the administrators of e-betting company World Gaming said this week.

The industry is facing a period of upheaval following US moves to clamp down on online gambling.

But despite fears that the collapse of World Gaming could be followed by others in the sector, Andrew Andronikou, of UHY Hacker Young, said it was an isolated incident.

‘We’re going to see consolidation in the industry over the next few weeks,’ predicted Andronikou as Sportingbet and Leisure & Gaming both sold their US operations for a token $1 on Friday. ‘Competitors are shutting down their US operations and concentrating on the European market.

‘I’ve spoken to most of them and Europe is still an attractive investment because of the industry’s low overheads. Most online gaming companies are effectively debt-free cash cows. The difference with World Gaming was that it had debts which were funding expansion.’

Andronikou is overseeing the administration of World Gaming alongside Peter Kubik.

‘At the moment, we are looking at the intellectual property rights in the software and infrastructure of the business,’ Andronikou added, ‘but I don’t think there’d be many others that would be looking for administration as a haven. If there were going to be it would have happened by now.’

At one point World Gaming’s share price slumped by 88% because of its reliance on its US operation. Its shares were finally suspended at 4p.

The US represented an overwhelming proportion of the company’s activities via its sites sportingbetusa.com, sportsbetting.com, betonusa.com and sportsbook.com, which it touted as ‘some of the largest and most profitable e-gaming sites in the industry’.

At board-level, the fallout has been severe as the US crackdown sparked a mass exodus.

In the last few weeks a domino effect has seen an increasing number of companies throwing in the towel before President Bush signed into law the Unlawful Internet Gambling Enforcement Act. The legislation makes it an offence for companies to accept or handle money obtained from online gaming in the US.

As President Bush prepared to sign the Act, World Gaming’s CFO David Naismith stepped down, as did chief executive Daniel Moran, sales and marketing director Jonathan Moss and non-executive director Michael Cumming.

World Gaming announced: ‘Following the suspension of trading, the directors of World Gaming have now determined that they are unable to continue the company’s US-facing operations.

‘This decision follows discussions with all key parties and after receiving appropriate legal advice. These operations contributed the overwhelming majority of the company’s revenues for the year to date 2006.

‘The board has consequently notified its secured creditor of the discontinuation of its US-facing operations conditional upon signing of the Act.’

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