Private Investor: Online poker investors have not been dealt all the cards

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The Independent Online

As you may have noticed, the shares were floated at 116p and were approaching 150p last time I looked. Not a huge premium, I grant you, but that increment is after all on top of an already generous valuation of about £5.5billion. That makes it bigger than many FTSE 100 concerns such as ITV or Rolls-Royce (although Rolls is still pushing all-time highs, I'm glad to say).

I don't have shares in PartyGaming, although I do still have my stake in Sportingbet, which owns Paradise Poker, quite a big player in the United States. The question is whether PartyGaming or the entire "poker sector" is a bubble waiting to burst.

There are easy comparisons to be drawn with the internet and technology share boom and bust of five years ago, especially as the various poker firms conduct most of their business on the web. There is the same fog of uncertainty about the future and the same lack of good, solid reliable information about market share.

As with the internet companies, the businesses are young, so there's comparatively little in the way of track record to examine. Everything seems driven towards brand recognition and the legal territory in which they operate is uncharted. Barriers to entry seem remarkably low in the poker business, depending which business model is followed. It looks like all over again.

Against that, though, is the reality that these poker outfits really do have customers and really do make profits. PartyGaming reported £192m in earnings last year, which places its market capitalisation in a different perspective, and marks it out from all the dot coms that were simply burning through their cash pile as they motored towards oblivion.

So I am perplexed. I have a stake in Sportingbet, bought in a couple of tranches out of curiosity and as a straight punt, and the fuss about PartyGaming's float and more generally about the on-line poker phenomenon has lifted them nicely. I'm sitting on a paper profit here, and there are arguments for diversifying into other companies in the business just as there is cause to head for the door and take the profits.

I suppose the truth is that poker is a much bigger business than I think it is, even though I have only heard of one person who actually plays poker on-line. How many do you know?

I'm very indecisive at the best of times and I'm in a terrible quandary as to what to do about my Sportingbet shares. I doubt I'd make a very clever or decisive poker player, online or in a smoke-filled room.

I don't know what to do so I'm doing nothing. A nervous time, and it's making me sweat.

Thank goodness that I can rely upon the more solid and old-fashioned businesses in the portfolio to continue coming up with the goods. Tesco is one long term, core holding that I've built up over the years and which defies gravity. After all, if you're number one in a market where else can you go? Yet the news that Tesco has breached the 30 per cent mark in its grocery market share does represent a remarkable moment. Only the authorities can stop Tesco eating Britain, and they seem unwilling to intervene again.

One last remark on GSK, whose chief executive, J P Garnier put up a brilliant performance and defence of globalisation during his interview with Peter Day on Radio 4's In Business. When I get a chance I'll be adding to my GSK holding.


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