What’s up with Amaya Gaming?
If you’ve been following our site at least for a while, you probably know that our interest in gambling doesn’t end with online blackjack. I can point the exact moment when it changed. It happened in 2010 when I read Peter Lynch One Up on Wall Street. What caught my eye was an example of a repair shop employee that invests is some “promising” new company, instead of noticing that certain tyres are suddenly sold like hotcakes.
Since then, I check new games, new developers and new trends in online gaming not just from players point of view, but also as an investor. It proved to be quite profitable: online gambling is still a very young market and it goes through major changes. Changes equal opportunities. You can take a look on 888 stock since US started to legalize online gambling, or NetEnt stock since they found the formula on how to create popular online slots. I’ll give you a hint, the first one tripled itself, while the second, using Lynch’s terms, is almost a 10-bagger.
So now it’s time to take a look on Amaya company. Before we start we would like to make clear that we are not investment advisor of any sort, but simple share our private view. If you wish to invest in any company listed on our site, please things for yourself.
What up with Amaya?
You’ll need probably few weeks and 100 pages to summarize Amaya history, but here are the major events:
- Prior 2014, Amaya was a minor, barely noticeable player in the online gambling world.
- 2014: Amaya acquired Poker Stars for 4.9 billion US dollars. The biggest acquisition in online gambling history. (Poker Stars and its sister Full Tilt control 70% of online poker market worldwide).
- Feb 2016: Amaya CEO, David Baazov, makes an offer to take the company private for $2.8B, 40% above its market cap at the time.
- March 2016: Poker Stars enter the US market. Within a week they become the biggest online poker room in New Jersey.
- March 2016: At the same time, David Baazov was charged with insider trading by Quebec securities regulators.
- March 2016: Baazov leaves his position and pledges not guilty to insider trading charges.
- April 2016: Amaya linked to Panama leaks.
As you can, past few months have been a turbulent time for Amaya gaming and currently the stock trades 56% below its 52 weeks high reached in July 2015.
What Will Happen When the Dust Settles?
This is the big question. If we put aside all the recent news, not that we intend to, Amaya is an extremely profitable company. In 2015 alone they managed to decrease their debt for PokerStars acquisition by over $500M. Their current debt stands on $2.5B, which means that even without future growth, within 5 years you get a free of debt, 500M a year generating company. Five years is a long time, but it can be much shorter. Amaya net earnings grew by 18% on year per year basis and with more US states legalizing online poker, Amaya will receive additional boost.
On the other hand, the company carries a heavy debt while their CEO, the person behind this huge turnover is facing legal charges. How these charges will affect the company? Can Amaya maintain the growth without him?
Unfortunately, we have no answers. At least at the moment. On May 16th Amaya will publish their quarterly results which may spread some light on their current situation. Meanwhile, we decided to wait till the dust settles.