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2008-04-12 02:31:51
World Poker Tour's Stock (WPTE) Dying a Slow and Painful Death
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Can anything resuscitate the rapidly withering stock of the World Poker Tour?
The stock, WPTE (listed on the Nasdaq), is currently trading at just $1.53. This gives the entire company a valuation of $31.35 million dollars.
This is a far cry from this time last year, when the stock was trading at around $5.50.
Just three years ago, the stock was trading north of $20 and had a valuation in excess of $400 million dollars.
WPTE hit an all-time high of $29.50 in July of 2005, when news of a possible $700 million bid, led by Doyle Brunson, hit the news. The bid later lapsed as the World Poker Tour was unable to determine the credibility of the offer. Complicating matters further at the time was the fact that the law firm representing Brunson and his "group of investors", Goodman and Chesnoff, removed themselves from the proceedings. The "bid" fizzled out. Anyways, this marked the all-time high for WPTE, and the stock has been heading downhill ever since.
The worst part of all (for WPTE management) is that no one seems to care about the stock. The stock had just 4,500 shares of volume today, and hasn't traded more than 10k shares in the past two weeks. This is a far cry from 2005, when the stock would easily average more than 300k shares of volume per day. There are no "big" analysts covering the stock, and investors couldn't seem to care less. WPTE seems to be marching towards penny stock status, and the company isn't doing much to help with its declining revenues and consistent quarterly losses.
How did it come to this? How did the company go from being worth nearly a half a billion dollars to just over $30 million in three years?
1. Increased Competition. The initial success of the World Poker Tour on TV has proven to be its own undoing. Our television sets have been flooded with new poker programming over the last couple of years (High Stakes Poker, Poker After Dark, etc. etc.) This has created a glut of poker shows and the World Poker Tour has found itself lost in a sea of rival poker programming.
2. Real-time Reporting. With many sites such as Cardplayer and Pokernews giving their readers a real-time, hand for hand breakdown of the WPT tournaments, many casual poker fans already know the outcomes of the WPT tournaments before they are even aired on TV. If you already know the winner and if you already know the outcomes of the major hands at the final table, then really what incentive do you have to watch the show? Most people would rather watch High Stakes Poker or even Poker After Dark, where the outcomes are not typically known to viewers beforehand.
3. The poker "boom" has tapered off. Poker is still extremely popular, but it's not the phenomenon that it was back in 2003-2005.
4. Their online gaming business has not worked out. According to their most recent annual report, the WPT generated just $1.1 million dollars in revenues for the year ended December 30, 2007 from their online gaming business. The thing is these are their gross gaming revenues, and don't include the costs incurred by the host of their gaming software, Cryptologic. Cryptologic is entitled to certain minimum revenue guarantees under the agreement, and apparently as of the end of 2007, the World Poker Tour had a shortfall of $183k which will be taken out of future settlements from Cryptologic. Basically the gist of this is that the WPT is making peanuts from their online gaming business. You would think that with their brand recogntion, they would be able to make much more from their online gaming operations, but this has not been the case at all.
5. Lower Licensing Fees. The World Poker Tour recently moved to the Game Show Network for season six of their show. In season five, the company made an average of $477,000 per episode from their agreement with The Travel Channel. In season six, the company has announced that the GSN will be paying them $300,000 per episode.
Can the World Poker Tour's stock recover? And if so, what will be the catalyst for their stock moving higher? I have a hard time figuring what the WPT could do to re-invigorate their company. Will the company's stock continue to wither away or will it mount a comeback?
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