With all of the headlines that the online gambling industry is making and all of the talk about how much money is to be made by investing in the online gambling market, it is no wonder that many investors are thinking about purchasing shares in one of the online gambling companies that have already gone public or are about to do so. One such company, PartyGaming, which owns the PartyPoker.com web site, is set to float on the London Stock Exchange for approximately four to five billion pounds. Returns from stocks in online gambling companies have just been exceptional. Sportingbet, for example, saw the price of its shares rise from 18 pounds to 290 pounds in just two years. PartyGaming’s flotation is sure to disappoint some investors, though, since the initial offering will be open only to institutions. Private investors will have to wait until the shares start trading before they can buy.

Many reasons have been given for the explosion in popularity of online gambling, one of which points to the increased number of female gamblers. Gambling over the Internet is a much more convenient and comfortable way to play than playing at a casino, so Internet gambling attracts many women who would never think of going to a casino to gamble. These same women, however, don’t think twice about booting up the computer and going to a web site to gamble. PartyPoker estimates that ten percent of its players are women, although other estimates put the figure three or four times higher.

Commenting on how the online gambling industry has become mainstream, Richard Hunter, the head of UK equities at Hargreaves Lansdown Stockbrokers, said: “Gambling used to have a cloak-and-dagger feel. Now you can bet from the comfort of you own home or the office. People who would never set foot in a casino are playing virtual poker online and you can now bet on just about any sport, along with financial stocks and indices.”

Whatever the reasons for the exploding online gambling market, many investors see it as an excellent opportunity for investment. Others, however, are not so sure, arguing that the fact that online gambling has become mainstream is no guarantee of the industry’s future financial success. Ryan Hughes, of Chartwell Investment Management, believes that the American resistance to online gambling and the illegal status of online gambling there puts the industry at risk. “Even if the US relaxes its stance, that could result in the creation of large US gaming companies which could take away market share from UK rivals”, Mr. Hughes pointed out. “The growth in these stocks has been so quick. No one can be sure that it is here to stay”, he added.

Echoing Mr. Hughes’ note of caution, Justin Urquhart Stewart, of Seven Investment Management, believes that Internet gambling will suffer a fate similar to that of the dot com industry a few years back. “There is excess capacity in the market and some of the smaller players are bound to collapse, which will create nervousness among investors. This is also an unregulated sector, which runs the risk of fraud and money laundering. If the sharp growth in share prices continues, there will be a classic mismatch between the stock market valuation and the real price of the business”, said Mr. Stewart.