Investors of the gaming software company CryptoLogic took a major hit on the London Stock Exchange last week, as shares sunk by 10% on Thursday alone after the market digested a report stating that revenue during the second quarter would fall short of expectations. The company attributed the downturn in revenue to the “seasonality and the effect of the Euro 2008 football championships,” which wrapped up in June. CryptoLogic also claimed that “its success in signing five new customers in the second quarter enhances its outlook for the second half of 2008.” The stock rebounded 4.16% on Friday, erasing some of the losses.
Research firm Roth Capital downgraded CryptoLogic on Thursday from “Buy” to “Hold.” The stock had last been upgraded in October, 2007. At the close of business on Friday in London, CryptoLogic shares were up ₤0.40 to close at ₤10.52. The stock’s low point over the past 52 weeks was ₤10.05. Over the past year, the stock has ballooned as high as ₤23.46, meaning the company has seen a tremendous amount of flux.
As if the downgrade and loss of capital for CrypoLogic wasn’t bad enough, the company also announced that it “expects to report higher-than-normal operating, general and administrative expenses. These higher costs include development consulting expenses that will accelerate both product development and the launching of sites for new customers, and an expenditure to protect the company’s intellectual property.”
With the reason behind the increased costs given some time to sink in, the stock rebounded on Friday, easing investors’ worries slightly. In addition, the company’s statement notes that five new customers were signed in the last quarter. This, combined with increasing Asian revenue, should yield long-term success for the software site: “Asian investments are beginning to earn revenue, with potential from multiple platforms in large markets such as China, Singapore, India and Korea.”
Crypto’s software is officially licensed by WagerLogic Limited. Its clients include some of the largest names in the online poker and internet gambling markets: Playboy Poker, William Hill, Littlewoods Gaming, InterCasino, Betsafe, CS Casino, Sun Poker, and PokerPlex. None of Cryptologic’s companies accepts customers from the United States in light of the passage of the Unlawful Internet Gambling Enforcement Act. The same holds true for goliath companies such as PartyPoker and Titan Poker. In general, companies which are traded on major stock exchanges, such as Crypto and Party Poker, have withdrawn from the U.S. market in deference to shareholders’ interests. Privately-held companies like PokerStars and Tokwire (Ultimate Bet and Absolute Poker) have elected to continue accepting U.S. customers.
In addition to the London Stock Exchange (CRP), shares of CryptoLogic are traded on the Toronto Stock Exchange (CRY, CXY) and the NASDAQ Global Select Market (CRYP). On July 22nd, the company announced that it had intertwined its online poker room and sports book on Betsafe. The move, according to a press release, meant “that Betsafe players can now enjoy the convenience of having one single account for all of their gaming needs.” Previously, players in CryptoLogic’s sports books were not able to use Betsafe’s poker room directly, which resulted in a considerable lost of potential revenue.
Besides its poker offering, CryptoLogic offers slot games including Bejeweled, the Hulk, and Spiderman. Its products are available in English, French, Italian, Spanish, German, Japanese, Chinese, and Greek, reflecting the international flair of the organization.
