PokerWorldNow

Just hours after I published my last blog speculating that one of the big boys came and snatched WPT away from Gamynia, it was announced that PartyGaming has officially made the acquisition. While I didn’t mention Party in my last blog, it fits in perfectly with the two strategic reasons that a large off-shore operator would be interested: pick up a powerful advertising medium in WPT’s TV distribution. and to provide a shell to help insure that the acquirer will have a chance at obtaining a license in a regulated environment.

Through a subsidiary, PartyGaming is acquiring WPT and is paying $12.3 million and 5% of future revenues. Gamynia was offer $9.1 million and 5%. The deal still needs to be finalized by share holders and becomes void February 24, 2010.

Those who did a detailed analysis (not me) on the deal in which Gamynia bought the World Poker Tour may have noticed that in the associated 8-K that was filed with the SEC there was a clause in the acquisition agreement that gave the WPT an out if a better deal came along. More specifically, the WPT has the right to terminate “under certain circumstances, including a determination by the Company’s Board of Directors to accept an acquisition proposal it deems superior to the Transaction.” All the WPT has to do is pay an “I’m sorry for changing our mind” fee of $1,000,000.

The WPT is getting a pretty good deal from Gamynia, to summarize: Gamynia pay $9.1 million in cash, WPT gets to keep the $21 million in the bank and WPT receives about 5% of future revenues.Who has come over the top (I promise the last poker metaphor that will ever be used) and piqued the WPT’s interest?

Assuming that the  Gamynia deal is really just a shell company for  PlayTech as I predicted in my first blog about this transaction, then perhaps one of the big boys, and by that I mean FullTilt or PokerStars, has taken a page out of this book and opened up their cash coffers. It is strategically logical for both companies to a) expand their push for producing TV shows as way of advertising and b) act as a hedge in a U.S. regulated environment because, as I wrote in my blog about the Menendez bill, it looks likely that off-shore operators will be rejected for licenses.

Thus far the WPT execs have kept mum about the deal, but I suspect if the deal goes through it will take a couple of weeks for an official announcement. Technically the Gamynia deal will automatocally terminate on Januray 28th, 2010.

Senator Menendez is Our Hero?

As reported by CardPlayer.com Senator Robert Menendez (NJ-D) introduced a bill in the senate to regulate and tax online poker, or more accurately Internet games of skill. The major difference between this bill and Barney Frank’s bill is that this bill focuses on online poker specifically while Frank’s bill is more general to different forms of online gaming. Both bills oppose sports betting.

The Menendez bill (full-text, yawn) aims to:

• Regulate and license Internet games of skill
• Define poker as a game of skill
• Define who is and isn’t suitable for licensing, and make it illegal to operate without a license. The bill outlines the specific qualifications an applicant must posses and discusses. Under the “unsuitable for licensing” it does not list current operators of online poker in the U.S., but does list any business that has taken sports wagers. Good for Full Tilt and PokerStars and others who have operated in the U.S., not so good for Bodog. <Update: upon further reading and research, I discovered  there is a protectionist clause that states that companies who have failed to pay taxes in jurisdictions in which those companies have operated will be rejected. Sorry Full Tilt, PokerStars, PartyPoker, 888, Titan, and so on.>
• Protect against underage gambling
• Define tax code and collect tax revenue
• Further define the wire act (a throw in for the NFL lobby?)

As far as how much a license will cost: it will be based on the cost of setup and administration of each licensee. Seems fair.

While I share the Poker Players Alliance optimism in the fact that it appears that regulation of online poker is picking up some serious momentum, there are some inherent problems with the Menendez Bill:

• Focus on poker. Since the Menendez bill focuses on poker there isn’t too much room for politicking. It seems like a take-it-or-leave-it affair. While the Frank bill has a lot of room for concessions, such as taking out some of the generic online gambling proposals and leaving it for another discussion.
• Defining poker as a game of skill. Of course I agree with this statement, but it is one that has two diametrically opposed sides. Typically the people that play poker understand that it is a game of skill, but people that don’t (or tend to lean to the righter shade of red) see it has having about as much skill as a slot machine. Menedez should not open this debate. It will drag down the bill in an unresolvable argument.

All this being said, I can’t claim that I am and expert in the legislative process, so someone who is might argue that this is a strategy to build momentum for the movement regardless of the bill that gets passed. Since Frank’s bill is a house bill and this is a senate bill, perhaps they will coalesce into some form of consensus.

For over 2 years I have watched the World Poker Tour stock (WPTE) hover in the  40 to 50 cent range, bottoming out at 25cents in January of 2009. Then in June something amazing happening. The stock went crazy and was up nearly 7X from its bottom. Someone somewhere knew something and it wasn’t me. A few days later rumors came out that PartyPoker was making a bid and then another rumor surfaced that Bwin was the suitor. Finally, on August 3rd it was announced that WPT was bought by Gamynia Limited.

Who?

No one has ever heard of (or, can pronounce) this company. Ok then, time to Google…

Google returned 461 listings and every single one (I didn’t look at every one, but at least the first 100) had to do with the aforementioned acquisition. This leaves us with two possible scenarios: 1) a couple of moneybags decided that it would be fun to run a struggling televised poker tour with negative returns, created a shell company and away they went or 2) a company that saw a strong strategic fit despite large losses created a shell company and away they went.

I am going with number 2. The press release also gave it away by saying “Gamynia has secured the services of an industry leading online gaming marketing company Hardway Investments Ltd. which will seek to exploit and develop the WPT brands with the goal of maximizing future revenue opportunities.” Ok, online gaming marketing company probably means there is some sort of online gaming plan. So, who is this Hardway company anyway? Time to Google.

Unlike Gamynia the mystery company, Hardway actually has a website. From the looks of it they seem be the holding company for Titan Poker and a couple of online casinos, all of which are on the PlayTech network. They also operate EuroPartners, the official affiliate network operator of PlayTech.

To me this is all starting to seem like a PlayTech-backed play to position a WPT online poker brand in the U.S. once regulation occurs. It makes perfect sense. The WPT doesn’t have the cash or know-how to compete with the big boys, whomever they will be in the future. MGM Mirage? Harrahs? Full Tilt? The Mashantucket Pequot Tribe?  Playtech and Hardway have the cash resources and the know-how to build and market a U.S.-based online poker room. They have done it in the past. Gamynia was simply created as a shell to distance Titan, and other skins that have raked in the U.S., from this deal. That’s my theory and I am sticking with it.

Since the acquisition the stock has dropped back down to about a buck, but someone made some money somewhere…