A lot of anticipation and excitement was generated when online poker company, PartyGaming, announced its intentions to float on the London Stock Exchange for the astounding amount of ten billion dollars, but that initial response has since turned into a cautious, wait-and-see approach. The change in how investors are viewing PartyGaming’s flotation is a result of the questionable legal status of the online gambling industry in the United States. More specifically, many potential investors have become increasingly wary about investing in Internet gambling companies because of the increasingly anti-online gambling policies of the U.S. government. In other words, the uncertain legal status of Internet poker in the U.S. has, effectively dampened investor enthusiasm for online poker. As a result, PartyGaming, whose brand site is PartyPoker.com, has slashed its original IPO price. Recently touted as the biggest float on the London Stock Exchange in the past four years, the initial ten billion expected flotation was reevaluated and put closer to the eight or nine billion dollar mark. Stock prices have also been affected by investor ambivalence. When plans for the flotation were first announced, shares were expected to go for approximately 24 times earnings but more realistic expectations now put shares at 13 to 14 times earnings.

The majority of PartyPoker.com’s customers reside in the U.S., which makes the whole legality issue particularly relevant. Thus far, law enforcement agencies in the U.S. have been reluctant to prosecute online bettors, but there is no telling when that policy may change. This is especially true given the current climate in the U.S. regarding online gambling. There have been stepped-up offensive measures directed at online gambling by not only the United States Department of Justice, but also by other legislative figures desiring to clamp down on the industry. U.S. trade representative, Rob Portman, recently received a joint letter from nearly forty states insisting that they reserve the right to decide whether or not to restrict gambling in each of their respective states. The letter was in response to the recent World Trade Organization’s Appellate Court ruling regarding U.S. policies towards online casinos and poker sites.

The questionable legal status of online gambling, although arguably the main concern of potential investors in PartyGaming, is not, however, the only factor negatively affecting the company’s plans to go public. The lower IPO price was also a result of the growing competition in the online poker industry and the fact that the float will primarily benefit the founding shareholders of PartyGaming instead of being used to build up the company.