Internet Gaming and Wall Street
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Internet Gaming and Wall Street
Online Gambling
Nov 9, 2000, 15:48
By Paul Haggerty http://www.gamblingonlinemagazine.com

It was nearly three years ago when I first discovered the online gaming industry.  As an investor, I was constantly perusing various industries in order to get an inkling as to what opportunities I could find that I believed to have great potential.  While browsing through the various gaming stocks (traditional land-based), I happened upon a company called Starnet.  To my utter shock, this was a company that produced software for online gaming.  Online gaming?  Just what I was always hoping for; a ground-floor opportunity!  Once I realized what I had discovered, I made it my prime-directive to learn all I could about the Internet Gaming Industry.

At that time, the Internet was still in its infancy.  However, I thought, "If you can combine one of the oldest and most successful businesses, namely, gambling, and couple that with this new medium of communication, then you would no doubt have one of the greatest opportunities of all time."

I recently released a report entitled, "eGaming: The Next Pot-of-Gold".  I gave it that title because I believe that this industry will definitely be Wall Street's next "pot-of-gold" and you can still get in on the ground floor.  With global online gaming revenues topping an estimated 2 billion this year, investors should salivate upon the news that some eGaming companies are already showing tremendous growth in revenues and, most importantly are showing EARNINGS!  That's right!  We are not talking about companies with no potential, dubious finances and a questionable future.  Rather, we have seen revenues grow by as much as 6,000% in some companies (compared to last year), expansion, growth and even earnings.

If investors who bought into the buying frenzy of stocks such as eBay, Yahoo, and Amazon.com last year were to discover this well-hidden secret, we can all set sail for the French Riviera.  What bodes well for the online gaming industry is that there are companies that, unlike the dotcom Internet stocks of last year's Hurrah, are actually profitable!

Knowing the idiocyncrasies of Wall Street and why they aren't talking about online gaming, you can begin to see the bigger picture.  There are two main issues keeping Wall Street at the curb for now.  They are the legal issue and the small cap issue.  Both of these warrant a degree of caution.  However, with diligent research one can find that both issues are not only minor at best, but may actually work to our favor in terms of the largest percentage return for investors.

 The Legal Issue: 

I find that the average person who neither follows the industry or understands it, thinks that online gambling is illegal, or soon will be.  As a result the notion of this dubious industry keeps investors away.  The fact of the matter is that online gaming is legal, licensed and welcomed in many areas of the world.  Australia was one of the forerunners of this industry by becoming the primary first-world country to open its doors to legalized gaming.  Europe, Asia, South Africa and other jurisdictions are following suit.  Though the U.S. by far has the most Internet usage among its citizens, the rest of the world is catching up.

In the U.S., however, we have been waiting for some sort of action concerning the issue of online gaming, one way or the other.  Technically, Internet Gaming is not legal in the U.S.; though there are no laws stating so.  Using existing laws that pertain to gambling such as the Wire Act, the Wagering Paraphenalia Act, and the Travel Act, the Justice Department has argued that Internet Wagering falls under the same precept of the law and is "technically" illegal.  U.S. lawmakers have taken two prominent steps - neither of which are in the industry's favor, but the results of which only demonstrate how futile banning online gaming is.

Two pieces of legislation, the Kyl Bill, sponsored by Senator John Kyl (R-AZ) and the Goodlatte Bill, sponsered by Representative Bob Goodlatte (R-VA), have sought to ban online gaming in most forms - making it a crime to place or even recieve a wager over the Internet.  The prospect of either bill becoming law is minimal at best, due to the many loopholes contained within the bills, lack of support from officials and the Justice Department - as well as a virtual rejection from White House staff sources.

To truly poke holes in this whole "Legal" thing and why it is a non-issue regarding investing in the industry, let's take a look  at what is currently happening.  For one, the industry is growing extremely fast - worldwide.  Naturally, the U.S. would be the largest market at this time, however none of the profitable or reputable companies are accepting wagers from anyone within the U.S.. Yet, eGaming companies such as Online Gaming Systems (OTC BB: OGAM), Dotcam Entertainment Group (OTC BB: DCEG) and Total Entertainment (OTC BB:TTLN) have all seen their revenues grow substantially over the past year.  In fact, Online Gaming Systems experienced revenue growth by up to 7,000%, for the first quarter - up 2000 compared to last year.  So, regardless of a ban on online gaming in the U.S., we have companies experiencing phenomenal growth in an enormous worldwide industry - without the participation of the U.S..  If the U.S. were to ban Internet Gaming tomorrow, absolutely NOTHING would change!  So, for that matter, what are you waiting for?  So, why not reward yourself and take a position now while everyone else is sitting on the sidelines waiting to see the outcome of this U.S. legislation.  The participation of the U.S. will only add to this industry.  Amazingly, companies like these have seen the price of their stock decline to almost one-quarter of their value of last year.  Growing companies like these are trading at insane levels as low as 24 cents.

Put on your thinking caps, folks.  If you bought 10,000 shares of an egaming company at 24 cents per share, you would have to invest a minimal sum of $2400. That's all!  Even in the worst case scenario, you would only lose $2400 if the company failed and went under.  Once this industry is exposed, can you imagine the influx of capital into this market?  If this 24 cent, unknown stock got the proper exposure, I could concievably earn $240,000 in a year or less.  Now, your $2400 investment is worth $240,000.  That's a 10,000% increase!  Compare that to the tech "big boys".  Sound improbable?  It shouldn't.  It happens all of the time.  Last year, Global Entertainment (OTC BB: GGNC) went from 10 cents to $6 (a 6,000% increase).  Starnet (OTC BB:SNMM) went from 45 cents to a high $29 (a 6,445% increase!).  Though those levels were not maintained for very long, ground floor investors made out quite well, me being one of them.  But now you have the opportunity to do the same.  But hurry!  Time is growing short.

Small Cap stigma: 

Other than the misinformation and the misunderstandng surrounding the legal issues, the other major hurdle keeping Wall Street away is the Bulletin Board of the Nasdaq over-the-counter Market.  For those of you who do not know, the OTC BB (abbreviated) has long been the market for small, start-up companies that do not meet the financial qualifications to trade on one of the more prominent markets.  In essence, the Bulletin Board has always been home to the "penny stocks" we've heard of.  Unfortunately for the industry, but fortunately for ground-floor investors, the policy of most Wall Street firms is not to cover or to recommend penny stocks.  But, what happens when we see a small company start to grow and no one on Wall Street can tell their clients about it until it is no longer considered a penny stock?  By that time, you will be buying in at $5 instead of 24 cents.  Now you've lost your big chance.  Those same 10,000 shares that you could have bought for $2400 will cost you $50,000.

The majority if eGaming companies are trading on the Nasdaq OTC BB, or other small markets. The same is the case in Canada and other markets aound the world.  The price one has to pay to be in on the ground floor is having to do your own research and find them on your own.  Or, you can talk to peole or visit sites like eGamingStocks.com to at least show you who the companies are.

So, where is Wall Street?  Wall Street is waiting.  Because they are waiting, it is still a fabulous ground floor opportunity for those of us who have knowledge.  If you want to make the eGaming industry your Pot-of-Gold, then use this knowledge that you have to your benefit.  It may be next week or next month, but the day will come when everyone will be talking about the Internet Gaming Industry.




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