Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:03 EDT, 3 October 2006

A two-way pull has developed among the online gamblers following the US Congress's decision to ban the use of credit cards, cheques and cash transfers to pay for bets, which triggered a massive sell-off in their shares yesterday.

Some in the City are convinced further selling is inevitable as firms face up to the huge loss of revenue that will follow if they are stopped from trading in the world's biggest gambling market.

Others think much of the selling has been overdone, and the US action will lead to a new round of takeovers and mergers among online operators.

The estimated value of the US online gambling market last year was $3bn (£1.6bn), and the loss of that will leave a big hole in the profits of companies such as PartyGaming, down another 4¼p at 40¾p, Sportingbet, 5p off at 61p, and 888.com, 3p lower at 105¼p.

PartyGaming saw more than £2.5bn wiped from its valuation as the price slumped 62p. It is almost certain to lose its Footsie 100 place. PartyGaming continues to hold £92m on deposit at the bank, the shares had been oversold.

But stockbroker Tony Craze says they are still overvalued. 'If the shares were worth 100p on Friday, and the company has just lost 75% of its revenues, how can they still be worth 42½p?' he asked.

Jeremy Batstone at Charles Stanley warns the company may have money in the bank, but it will not last unless it keeps the costs under control or finds an alternative revenue stream.

Rival Sportingbet, whose former chairman Peter Dicks was released from custody in the US last week, fell 60% with chief executive Nigel Payne accusing the US of forcing the company out of the lucrative American gambling market.

He was also critical about the lack of support from the UK Government and the European Union. 'We have the technological capability to carry on trading, but if the Government doesn't say that this is absurd protectionism, then it's very difficult to carry on,' he said.

Sportingbet yesterday for a second time dropped its bid for rival World Gaming, down 2¾p at 12½p.

World Gaming's share price collapse will hit smaller-companies broker Daniel Stewart, which says it will post a loss of £1.3m on 800,000 options. Gaming Corporation rallied 0.88p to 6p and Neteller, which provides payment systems for the gamblers, jumped 25p to 165p, but Ubet2win was down 0.13p to 1.12p and Empire Online was off ½p at 50p.

Share trading generally proved lacklustre after a drab performance overnight on Wall Street. The FTSE 100 index fell 20.7 to 5937.1.

The City expects plenty of benefit to accrue from Xstrata's takeover of Canadian miner Falcon- bridge, and that has allowed the Anglo-Swiss company downgrade the size of the rights issue from £3.7bn to £2.9bn. Xstrata rose 48p to 2246p. Mining companies on the slide were Kazakhmys, down 30p at 1108p, and Anglo American, 59p lower at 2234p.

Mecca bingo and Grosvenor casino group Rank fell 5p to 231½p after Morgan Stanley placed 17m shares at 230p. Black-cab maker Manganese Bronze rose 17p to a record 357½p.

The normal market size is just 1000 shares at a time with market-makers forced to make a 6p bid-offer spread. The price has risen from a 174p low since March on talk of a deal to make cabs under licence in China.