Poker shares in decline

Aug 30, 2005 3:45 AM

It has been a tough year for investors in the shares of WPT Enterprises Inc. (WPTE), parent of the World Poker Tour whose televised poker tournaments on the Travel Channel spurred the poker frenzy that has spread worldwide.

Business for WPTE and its majority stockholder, Lakes Gaming Inc. (LACO) appeared to be going along swimmingly until Lakes Gaming announced early this year that it would not be able to file its financial statements because of a dispute with the Securities and Exchange Commission regarding the manner in which LACO was accounting for the money it was advancing to Native American tribes in hopes that the tribes would build casinos.

That was followed by the resignation of its independent auditing firm of Deloitte and Touche.

The Deloitte firm also resigned from the WPTE account when the company announced that it was starting an online gaming Internet site based in England. Deloitte and Touche said it was backing out because it felt the online phase of the accounting process would be too complicated for the amount of money involved.

At the time, WPTE shares were trading in the mid teens and no one anticipated the reaction that would come from an unsolicited bid of $700 million for the company by poker legend Doyle "Texas Dolly" Brunson and associates. The WPTE shares zoomed up to more than $29 each. The euphoria was short-lived, however, since there was no follow through on the buyout proposal. And, as to be expected, the share price plummeted to the high teens.

But within a short time, investors lost interest in the company and the company’s shares continued to lose value until last week when WPT Enterprises Inc. issued its financial report for the second quarter of the current fiscal year. The numbers were disappointing to both analysts and investors and the share price continued to fall, reaching $11.90 each.

The company said it had lost $426,000 or $0.02 per share on revenues of $6.6 million during the period that ended on June 30. In the comparable quarter of 2004, the company had revenues of $4.7 million but earnings of $887,000 or $0.06 per share.

The high cost of developing a Professional Poker Tour was given as the major reason for the earnings decline.

Also discouraging to some analysts was the company’s comment that it "did not expect to recognize revenues associated with the Professional Poker Tour or significant online gaming revenues in the third quarter of 2005."

Analysts had suggested that the real value in the company was the prospects of success with their online operation. However, since WPTE has announced that it will not take action from U.S. residents, making inroads in the highly competitive Internet market will be difficult.

That competition includes two of the largest Internet sites, British-based Party Poker owned by Party Poker Plc, and Gibraltar-based Cassava Enterprises. Earlier this year, Party Poker became one of the most successful initial public offerings ever held in England. And Cassava recently announced that it plans a September IPO for its 888.com Internet site.

On Friday, WPTE ended the week’s trading by closing at $12.28 a share.

American Wagering

American Wagering Inc. (BETM) revenues for the second quarter that ended on July 31 were up 14% to $6.3 million while net income increased to $811,183 when compared to last year’s second quarter, according to a report released by the company on Monday.

Included in the second quarter, the company said, was a "significant adjustment resulting from the issuance of the company’s common stock to Michael Racusin" in response to a lawsuit that Racusin is appealing.

By making the stock issuance, the company said, the company’s total stockholders’ equity increased $1.3 million.

The reported net income resulted in earnings per share of $0.09 whereas last year in the comparable quarter there was a per share loss of $0.01.