Cassava IPO Lower Then Expected

Published: Friday, September 30, 2005 Online-Casinos.com

CASSAVA IPO LOWER THAN EXPECTED

Analysts blame Party Gaming online poker pessimism

London analysts were this week blaming the lower than expected debut on the London stock exchange of Cassava Enterprises on market sentiment affected by pessimistic comments from the CEO of Party Gaming.

The BBC reported that PG's comments that online poker may be running out of steam could be the cause for the fall in share price experienced this week.

Online gaming firm Cassava saw its shares fall by 12.3p in London trading, after launching at 175 pence, a price valuing it at around GBP 590 million ($1bn). Initially, the shares jumped 5 percent, before falling 12 percent to 162 pence. But by the close of trading they had recovered slightly to 170 pence.

Institutional dealers started trade on Thursday, with full trading on Monday.

The firm is the latest to come to market, although confidence in the sector was recently hit when rival Partygaming warned growth may slow.

Cassava / 888 is 90 percent controlled by two Israeli families and run by Gibraltar-based Cassava, which runs two other sites - online casinos Pacific Poker and Reef Club.

Shares in 888 were down to 162.7 pence in mid-afternoon London trading. CEO John Anderson said there had been plenty of appetite among institutions for the shares.

He added: "We are delighted that 888's IPO has attracted such strong support among leading UK and European institutional investors."

More than 20 million people are registered to use its portfolio of websites.

John Anderson said: "We have a clear strategy for creating sustainable shareholder value by becoming the market leader in the online gaming industry and continuing to provide our members with a comprehensive range of gaming activities in a secure and trusted environment."

In early September the market cooled towards the sector after Partygaming warned of slow growth, and its shares fell by 30 percent. "We don't know the track record on a historical basis of these online gambling companies, " David Buik, of Cantor Index, told the BBC on Thursday. "We know what we will make this year and next year, but we don't know what they will be doing in five years' time."

He said it was "too early" to say if the online gambling bubble had burst, but remarked that 888 was a "well-run company". "They haven't been too ambitious on the [flotation] price, which is a good sign."

In early September, 888 said that net gaming revenue from its casino business was up 14.2 percent in the first half of 2005 compared with a year ago. Net gaming revenue from its poker interests jumped by 226 percent, although the firm said it did not expect growth to continue at this rate.

Investors said 888's IPO pricing was sensible, and that compared with PartyGaming it was less exposed to poker and the risky United States.

"Overall there's a better spread of business and the management team comes across well, so within this marketplace 888 seems like a reasonable proposition," said John Wilson, investment director of UK equities at 888 shareholder Standard Life Investments

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