Trends In The Gambling Market

Every day all round the world literally billions are gambled across stock markets in the world’s major cities like London, Paris, New York and Tokyo. So it’s not surprising that the gambling market itself holds a strong attraction for investors anywhere.

 

But in an environment that is naturally volatile and which can be affected by all kinds of factors from employment figures to election results, investing in the gambling industry is probably an activity best left to those with strong nerves.

 

This is mainly because of the unique combination of pressures that come to play on the businesses involved in the sector which include fierce competition, the ever-present threat of restrictive legislation and the prospect of greater tax burdens being placed on key players.

 

One aspect of the industry that has shown remarkable growth over recent yearsis online gambling and companies involved in this have been amongst the best performers in terms of market value.

 

However, there are some storm clouds on the horizon in terms of increased taxation on the free bets that so many use to attract new players to their sites. From August 2017 there will be a 15% levy on these which, it is estimated, will raise £45 million in tax in the first fiscal year alone.

 

So, against this backdrop of threats to profits, a number of online casino companies have chosen to merge in the last couple of years to create giant organisations which may make them more competitive and stable in the light of potential volatility.

 

Two of the highest profile mergers of the last two years were between Betfair and Paddy Power and between Ladbrokes and Coral.

 

The former pairing created a truly huge business with a market capitalisation estimated to be approaching £7.5 billion. Things didn’t run quite as smoothly for the Ladbrokes and Coral merger as the Competition and Markets Authority intervened and insisted that the two businesses disposed of 360 of their betting shops before the deal could be waved through.

 

Another merger which ran into difficulties came when William Hill rejected the advances of a partnership between Rank and 888 Holdings on the grounds that, despite an offer of almost £4 a share, the company was being under-valued.

 

Last Summer William Hill also entered merger talks with Amaya Inc. which, if it had come off, would have created a £5-billion-plus company. However William Hill shareholders strongly opposed the merger so it was eventually abandoned.

 

Nevertheless, it is expected that one of the companies in the original William Hill negotiations, 888holdings (is listed on the LSE (ticker: 888)), owner of 888casino the successful online casino, will continue to both seek out and be attractive to new partners.

 

One of the sector’s most innovative and successful performers, the company’s share price has weathered the last five years exceptionally well reaching a peak 0f 237p in 2016 and holding steady above 200p into 2017 so far.

 

So despite the choppy waters the economy may be heading for over the next few years it does seem like the trends will be positive for the gaming industry – possibly even making it one of the safer bets in the markets.