The name David Einhorn is familiar to many in the poker community. The hedge fund manager who started one of the most watched companies in North America, Greenlight Capital, Einhorn has also shown a proclivity for poker over the past few years. He first struck poker gold at the 2006 World Series of Poker Championship Event, making it to 18th place before departing (then donating the entirety of his $659,730 in winnings to charity). At the inaugural Big One for One Drop in 2012, Einhorn worked his way to the show spot in earning a $4.352 million payday.
Suffice it to say that Einhorn knows his way around the poker table. So why would he take a shot at being a stockholder with Amaya Gaming, the biggest online gaming and poker company in the industry?
According to Gurufocus.com, Einhorn recently purchased more than 3.9 million shares in the company (3,962,684, to be exact), valued at roughly $60 million, prior to entering the final third of 2016. The purchase of the Amaya stock was in amongst other popular buys as Rite Aid (pharmaceutical sales), ARRIS International (communications) and Hertz Global Holdings (consulting and outsourcing), among others, but what was it that made Amaya so attractive that Einhorn pulled the trigger on a deal for a massive amount of stock?
Writer Bram de Haas of Gurufocus.com opines that the reasons for the Einhorn purchase range beyond just what Amaya has done with online poker. While noting that having the number one online poker site in the industry in PokerStars is a good thing, de Haas also details that currently online poker is having some difficulties. With individual countries enacting their own laws regarding online poker operations and/or examining ways to ban the activity, the “poker boom” that raged from the early Aughts through “Black Friday” has essentially ended (not a news flash to those of us in the poker industry).
De Haas believes that Einhorn is looking beyond just the potential of the poker product, in particular some of the ways that the poker product might be used to expand beyond just that game.
Amaya, which has been able to get PokerStars back in action in the U. S. in the New Jersey online casino industry, also has been providing a Fantasy Sports (DFS) product. StarsDraft, which was created last year, has been able to make inroads into the DFS world (but is staying on the good side of U. S. regulators, only operating in four states – Kansas, Maryland, New Jersey and Massachusetts – that have authorized DFS games), using the massive mailing list that it compiled from its PokerStars days. Adding in BetStars, a sportsbook operation that is linked with the PokerStars branding, and Einhorn is betting that the Amaya stock will, in the future, be one of the top stocks in the industry.
There are three things that de Haas points out as being critical to the development of Amaya as a stock and, along with it, bring the financial windfall that Einhorn is betting on. “One, all U. S. states (have to) adopt clear poker regulations that at least allow Amaya into the market,” de Haas writes (something that, as seen in California, is going to be difficult to achieve). “Two, the U. S. (has to) arrive at a clear regulatory stance towards DFS (something that is already happening in that particular industry); and three, the Sportsbook’s expansion has to continue.”
Einhorn’s history in the business dictates that you at the minimum pay attention to his picks. Through running Greenlight Capital, Einhorn short sold Lehman Brothers stock prior to their eventual collapse and closure in the financial collapse of 2008 and has made quite a bit of money through this process with other companies. Greenlight Capital and Einhorn have also been on the other end, receiving a fine from the United Kingdom’s Financial Services Authority in 2012 for insider trading.
Charitable causes have also been very important to Greenlight Capital. Beyond Einhorn’s own philanthropy, the company has also contributed to such charitable causes as the Tomorrow Children’s Fund, the Center for Public Integrity and the Project on Government Oversight. Einhorn himself usually participates in one of Wall Street’s biggest charitable poker events, the “Take ‘Em to School” Poker Tournament in New York City, which benefits Education Reform Now.
Is Einhorn’s bet on Amaya one that will play out to a profitable close? Or has Einhorn backed the wrong horse this time? If history is any indicator…don’t bet against Einhorn’s instincts.
