Despite having a recent change in CEO and unwanted publicity, the numbers appear to show it's business as usual at Amaya.
When you look at the PokerStars owner’s Q1 2016 financial results that were published on Monday, revenue is no longer a reflection of hefty percentage increases. The total of $288.7m is a 6% year-on-year increase and adjusted EBITDA of $123.4m is a 9% upturn. These numbers, compared to revenue of CAD$12.8m (US$9.9m) in Q1 2014, are another illustration of how far the company has come, virtually turning itself from a B2B company to a B2C company by purchasing Oldford Group, then owner of Rational Group brands PokerStars and Full Tilt for $4.9bn in 2014, as well as selling off its B2B assets Cadillac Jack as well as Chartwell and Cryptologic.
David Baazov voluntarily took an indefinite leave from the position of CEO in March after being charged by Quebec financial security regulator the Autorité des marchés financiers (AMF) with five charges related to insider trading, “in particular for aiding with trades while in possession of privileged information, influencing or attempting to influence the market price of the securities of Amaya inc., and communicating privileged information”. Baazov, along with five other accused parties, has pleaded not guilty in writing, and Rafi Ashkenazi has taken over the position of CEO at least on an interim basis. Ashkenazi said: “During the first quarter, we continued to execute on our growth plans despite unexpected challenges, including management changes and the ongoing strategic alternatives process.”
AMF spokesperson Sylvain Théberge was reported by The Canadian Press to have said that the penalty for insider trading ranges from $5,000 to $5m per charge plus up to five years imprisonment. Should Baazov be found guilty, it is not known if or as to what level Amaya could face any punishment as a business.
How will this impact on the future?
What the Q1 numbers show is that Baazov leaves behind, at least for the time being, an incredibly healthy operator that is unlikely to be affected by his absence.
If you talk to the recreational poker players outside of the US, you would most likely find a majority are unaware of PokerStars’ history in the US or even what “Black Friday” was, so what would the CEO being found guilty of insider trading do for business? It’s probable that it would have little or no impact on day-to-day business at ground level. There is no requirement to read trade press if you want to get into online poker and Amaya seems to have made it clear it is going after the casual player, if recent changes to its VIP rewards system are anything to go by.
One of the key problems that has stemmed from the allegations is that this could harm Amaya’s chances of being involved in a regulated online poker market in California, should there be one in the future. California might be a far more heavily-populated state than New Jersey, 39.1 million vs 8.96 million as of July 2015 according to the United States Census Bureau, but what seems clear at this time is that the US i-gaming market is far more reliant on PokerStars for future growth as opposed to the other way around. From its New Jersey launch in late March up until the end of April, PokerStars generated $2.4m in poker win in the state, and has already taken a market lead over Borgata/BwinParty and WSOP.com/888. Can a California i-poker market that is not open to any other form of online gaming provide the kind of taxes the state would like to see without PokerStars operating in the state?
It’s a similar state of play in New Jersey. One view is that because Amaya had to go through such a lengthy clearance process from the state’s Division of Gaming Enforcement, why should its position not be revisited if the verdict was guilty? Well, all Amaya had to do previously was sever ties with those involved in PokerStars and Full Tilt’s post-UIGEA operations, so why would this be any different? The DGE is not being run by fools and recognises the importance of PokerStars’ presence in the market, and a review of the legality of its place in the market is not likely, particularly as any potential insider trading would not have taken place within New Jersey’s borders in the same way that PokerStars’ post-UIGEA operations did.
Position of strength
Yes, we have been here before when dissecting PokerStars’ past, but the point is the same. That does not make Amaya infallible to ethical guidelines, but it’s just the way it is. Amaya and PokerStars were doing more than ok without California and New Jersey and there is little reason why that should change even if its operations or potential operations were affected in those states. It might only be harmful if the US was to open up on a broad scale without PokerStars operating in it.
In its H1 report last year, Amaya said PokerStars held a 68% share of the global real-money online poker market. There will have to be some quite formidable “unexpected challenges” to get in the way of this now.
Sportsbook is now partially accounting for an estimated 21% of total casino and sportsbook revenues combined anyway, up from 17% at the end of Q4 2015, due to the growth of BetStars, potentially down to a marketing push and the use of the “Spin & Bet” feature on the site. This has not needed the US to make this progress and has not been affected by goings on at the brand’s owner.
Of course, the very purpose of any company or brand is to continue growing, but unless the AMF found some way to order Amaya or PokerStars to voluntarily give up some market share, there is no reason why any boardroom episodes should be affecting its position as an extremely powerful i-gaming player.