London (Reuters) – Internet gaming group BETonSPORTS, which removed its chief executive from his job following his detention in Texas last month on racketeering charges, said on Friday it was closing down the U.S. business, the driver of most of the company’s profits.
The company’s decision to halt operations in Costa Rica and Antigua, where its U.S. operations are based, puts a question mark over how BETonSports will recover from the ongoing court action it faces in the United States.
BETonSPORTS London shares have been suspended for the past three weeks.
Altium Securities analyst Greg Feehely described the company’s decision to drop its U.S. business as the worst possible outcome for shareholders given the U.S. accounts for around 95 percent of profits.
„Today’s news does at least draw a line under the situation and of course removes a significant competitor in the U.S. market ahead of one of the busiest periods of the year,“ he said in a research note.
BETonSPORTS might have to sell its Asian business to settle its outstanding liabilities, leaving nothing for equity investors, he said.
However, a spokesman for the company said it would be premature to comment on how BETonSPORTS would come through its current U.S. legal issues.
„The board believes they have sufficient assets to settle the liabilities of the business in an orderly manner,“ he said.
BETonSPORTS said earlier on Friday its U.S. operations were no longer viable amid a restraining order on the business and the charges faced by former Chief Executive David Carruthers.
The company said it would pay any liabilities to staff and creditors and repay balances due to U.S. customers. Its ability to do this would „take time“ and partly depend on whether it could persuade banks and other intermediaries to release its funds, the company added.
„It will also depend on the company’s ability to realise further and sufficient funds from its assets and operations outside Costa Rica and Antigua and to earn sufficient profits from operations which are not U.S. facing,“ BETonSPORTS said.
Several hundred Job cuts
Management were taking steps to make sure the company did not knowingly accept any wagers form U.S. customers, it added.
Around 800 staff in Costa Rica and Antigua are losing their jobs due to the closure of the U.S. operations, said the BETonSPORTS spokesman.
BETonSPORTS’s full-year results for the year to February 5 showed pretax profit of USD 14.9 million (7.9 million pounds), compared with USD 13.3 million a year earlier.
Although the United States accounts for the lion’s share of the company’s business, BETonSPORTS has been expanding its Asian business via acquisitions including Easybets last year and China’s sportsbook Hooball and 777ball in May. Easybets takes about 80 percent of its business from China and Hong Kong.
Feehely said that UK online gaming firms with significant U.S. business like Leisure & Gaming and online bookmaker Sportingbet were likely to be beneficiaries of BETonSPORTS‘ U.S. closure.
He said, however, that short-term sentiment across the UK online gaming sector was likely to take a fresh hit.
In afternoon trading shares in Sportingbet were 7.6 percent lower at 249-1/2 pence, while Leisure & Gaming was unchanged at 77 pence. Shares in PartyGaming were down 2 percent at 108-3/4 pence while Internet casino and poker room 888 Plc was trailing its opening level by 1.4 percent at 73-3/4 pence.
Carruthers and seven others have already pleaded not guilty to racketeering and other charges and a U.S. court has extended to August 14 an order barring the online bookmaker from taking U.S. bets.
Carruthers was arrested by U.S. authorities in July while passing through a Texas airport. He was en route from the United Kingdom to Costa Rica.
The charges allege the company failed to pay U.S. excise taxes on more than USD 3.3 billion in wagers taken from U.S. gamblers. The government seeks forfeiture of USD 4.5 billion, removal of access to BETonSPORTS’s Web sites in the United States, and the return of money held for U.S. account holders. The United States is the bookmaker’s biggest market.