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| Monday, October 02, 2006 |
The stock of Canadian-based Internet gaming software maker CryptoLogic Inc. took a pounding Monday, after the U.S. Congress passed legislation over the weekend that effectively blocks on-line gambling in the huge U.S. market.
CryptoLogic tumbled 18 per cent, or $4.08, to $17.98 in early trading in Toronto, after Congress passed a bill that bans the use of credit cards, cheques and electronic money transfers for on-line gambling. President George W. Bush is expected to sign the bill into law Monday.
In a news release earlier Monday morning, the Toronto-based company said that as a result of the legislation, licensees of its licensing unit, WagerLogic Ltd., will cease accepting wagers from U.S.-based players effective immediately.
“Based on historical results, the annualized impact on revenue of [Monday's] decision would have been approximately $30-million for the full year 2006, with an estimated effect on earnings of approximately 80 per cent of that amount,” the company said.
However, it played down the threat of the new law to its business model.
“The company has spent five years preparing for this eventuality by shifting its revenue base to fast-growing European markets, and is positioned for long-term profitability and growth,” it said in a release.
“While the new U.S. developments will be a challenge for the whole industry, our company's diversification, strong balance sheet, thriving European customers and potential new business in emerging markets enable us to face the future with confidence,” said Lewis Rose, CryptoLogic's president and chief executive.
The company said more than 70 per cent of its licensees' revenue come from outside the United States.
“We believe Internet gaming can and should be regulated, licensed and taxed. The U.K. model is the right one: Create a safe, secure and regulated environment for players to enjoy this form of entertainment,” Mr. Rose said. “We will continue to advocate regulation as the logical solution for all stakeholders, including players, investors and governments. In the meantime, we will continue to deepen our existing relationships and attract potential new customers in Europe, Asia and other thriving and emerging markets.”
The company said it is proceeding with plans to relocate its global headquarters to Ireland, “with continued commitment to its operations in Canada, the United Kingdom, Cyprus and Singapore.” |
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