Loading ...
Sorry, an error occurred while loading the content.

Gazette-Mohawks' gamble delayed

Expand Messages
  • Don
    ... From: Keith Myiow Sent: Tuesday, August 01, 2006 5:29 AM Subject: Fw: Gazette-Mohawks gamble delayed ... Mohawks gamble delayed Volatile industry; U.S.
    Message 1 of 1 , Aug 1, 2006
    • 0 Attachment
      ----- Original Message -----
      From: Keith Myiow
      Sent: Tuesday, August 01, 2006 5:29 AM
      Subject: Fw: Gazette-Mohawks' gamble delayed



      ----- Forwarded by Keith Myiow/MCK on 08/01/2006 08:29 AM -----
      Mohawks' gamble delayed
      Volatile industry; U.S. government crackdown feared
      DON MACDONALD, The Gazette
      Published: Tuesday, August 01, 2006
      The Mohawks of Kahnawake have had their stock-market debut rained out by storms lashing the Internet gambling world.

      The Mohawks own a 40-per-cent stake in a company called Continent 8 Technologies PLC that was supposed to have gone public today on the London Stock Exchange's junior AIM market.

      But volatility in online gambling stocks in London, amid fears of a U.S. crackdown on the industry, forced the postponement of the Continent 8 initial public offering until the fall.

      Continent 8 has an exclusive agreement with Mohawk Internet Technologies in Kahnawake to offer its hosting services to owners of sites in the fast-growing $12-billion (U.S.) online gambling industry.

      MIT's powerful computer servers have made the Kahnawake reserve one of the world's most popular jurisdictions for hosting online gambling sites. Its 61 customers include the world's top five poker sites and seven of the top 10 online casinos, according to Continent 8's preliminary prospectus, an information document for investors considering buying shares in a stock issue.

      Continent 8 wants to raise money for a "global grid" of computer centres, including MIT's facilities, to serve the gaming industry and other e-businesses.

      The Kahnawake business is remarkably profitable, especially because MIT pays no taxes. MIT posted a net profit of $17.4 million U.S. in the year ended March 31 on revenue of $24.7 million U.S., according to the prospectus.

      The buoyant market for Internet gambling shares in London was slammed this month when Betonsports PLC and its chief executive were charged in the U.S. with racketeering and fraud.

      In the wake of that prosecution, shares in other online gambling companies plunged, including those of PartyGaming PLC, the world's largest online gaming operator, whose chief executive is Montrealer Mitch Garber.

      U.S. players accounts for more than half of worldwide online gambling revenues.

      Share prices have since recovered, but the volatility, combined with instability in the Middle East, curtailed investors' appetites for new share issues, said Continent 8 chief executive Michael Tobin. The IPO was put on ice yesterday morning.

      "Due to the market conditions, the investors pulled back," Tobin, a longtime adviser to MIT, said from Continent 8's head office on the Isle of Man. "We fully intend to see how the markets change by the autumn and look at doing the IPO then."

      The company hasn't said how much money it was looking to raise.

      (Besides the MIT's 40 per cent, the rest of the company is owned by Tobin and other investors.)

      Tobin said the firm will now look at other financing options such as a private-equity investment or borrowing money to finance its expansion. But a public offering in October or November remains its preferred course.

      Besides the MIT operation in Kahnawake, Continent 8 is completing a computer centre in Singapore and building another facility in the Isle of Man, off the coast of England. It's also looking to acquire another centre in Europe. Tobin said the firm is also negotiating with the Mohawks to participate in the building of second centre on the Kahnawake reserve.

      He said he will fly into Montreal next week to brief the Kahnawake band council on developments.

      The Mohawks assert their jurisdiction over gambling but the provincial and federal government maintain only the provinces and territories can operate gambling ventures. Quebec has so far tolerated MIT but a crackdown is listed as a risk factor in Continent 8's prospectus. The document also warns there is a risk that the company might fall under the grasp of the long arm of the Canadian tax authorities.

      The Kahnawake economic development commission's stake is held in an Isle of Man registered company. Grand Chief Michael Delisle said in May that an essential feature of an IPO would be an allotment for ordinary members of the community.

      But Canadian securities regulations make that a sticky proposition and Tobin said the postponement of the IPO will give more time for Kahnawake to figure out how to cut in individual band members.

      A spokesperson for the Kahnawake council declined comment yesterday. He said the chief and council have yet to be briefed on the postponement.

      dmacdonald@...

      © The Gazette (Montreal) 2006









      [Non-text portions of this message have been removed]
    Your message has been successfully submitted and would be delivered to recipients shortly.