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As Summer Approaches Beware Casino IPOs

As the financial world is discovering, online casino companies are far more than just simple hobbies or small businesses designed to make players happy or themselves a buck. A revolution of sorts is under way in the online gambling industry, as online casino companies worth millions suddenly get the urge to go public on a stock exchange, sometimes turning those millions into billions overnight. Such successes for online casino outside of a gambling setting are cause for optimism about the future of the industry, but it should be a cautious sort of optimism.

The rush last year of online casino companies to release an IPO (initial public offering) and in so doing transform themselves into online casino corporations reflected an idealism of the proven strength of online casino companies, and the success of one online gambling company in particular, Party Gaming, which mid-summer last year released an IPO and did very well. Such successes of similar companies are old hat, and should be applauded. But in the rush to offer shares of online casino companies, a danger arises that too much enthusiasm could lead to a bubble that expands too fast and then crashes in on itself, leaving economic ruin in its wake.

In recent months several online casino companies announced their interest in an IPO once again after a lull, and even software providers also made known their intentions to go public as soon as they can. Riding Party Gaming’s coattails may have seemed like fun last year, and while the opportunities for growth are still ripe at the moment, caution must be displayed by online casino companies to avoid a “Dot Com Bust Part 2” as 2006 moves full speed into spring and summer.

OCA News Editor

Jenny McKinnley is OCA’s financial correspondent. After spending years on the trading floor in both NY and London, she offers insight from the inside out on world financial news and events.