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Amaya Gaming Issues Statement After Acquisition Rumors Fuel Stock Surge

Canadian i-gaming company Amaya Gaming issued a statement on Monday as a public acknowledgment that rumors of the company’s involvement in a possible acquisition of a competing software platform have helped fuel a rapid uptick in the company’s stock price.

amaya-gaming-logoThe noncommittal statement by Amaya (below) did nothing to dampen investor enthusiasm.  Shares of Amaya (AYA), traded on the Toronto Stock Exchange, closed at $11.05 on Tuesday.  That close was a $.50 gain (4.74%) for the day, and is part of a massive surge from a low below $6 in mid-April.  Amaya shares had climbed steadily for most of the past 12 months, dipped sharply in March and April, then rebounded on the strength of the rumors and a rosy first-quarter earnings statement that showed the firm posting nearly $40 million in net income and diluted earnings of $.38 per share.

According to the company:

MONTREAL, May 26, 2014 – In response to trading activity that may stem from market rumours that have come to the company’s attention regarding a potential strategic acquisition, Amaya Gaming Group Inc. (TSX: AYA) stated today that strategic acquisitions have been and are one component of the company’s growth strategy and, as such, Amaya regularly evaluates potential acquisition opportunities. From time to time, this process leads to discussions with potential acquisition targets. There can be no assurance that any such discussions will ultimately lead to a transaction. As a general policy, Amaya does not publicly comment on potential acquisitions unless and until a binding legal agreement has been signed. The company intends to make no further comment or release regarding current market rumours unless and until such comment is warranted.

A more detailed examination of the company’s numbers shows that much of the Q1 income was a one-time boost due to the sale of WagerLogic, one of several software platforms that Amaya has acquired or considered as a market-investment vehicle in recent years.  Yet looming larger for long-term investors was the company’s April 1st announcement of a software deal with Ultimate Gaming to provide a suite of online-gambling offerings for Ultimate’s new ucasino.com site, as part of Ultimate’s deal with Trump Taj Mahal.

Other possible acquisitions are fueling the surge as well, including widespread but largely unfounded rumors within the poker world that Amaya may purchase the privately held PokerStars, purportedly to free PokerStars from the US Department of Justice concerns that have dogged its principal owners, the Scheinberg father-and-son combo Isai and Mark, as they have sought US regulatory approval.

A weekend piece at CalvinAyre.com was one of the first to link Amaya to Stars, though that piece offered no facts to support its conjecture and the possibility seems generally unlikely.  A more workable scenario for all involved would be for Stars to sell exclusive platform rights to its software for the US market only, via the creation of a spinoff such as Rational US (which already exists as a corporate entity), thus preserving its revenue streams across the rest of the globe, where it’s the runaway market leader.

Amaya, for its part, has quickly established a track record as an active acquisitions and marketing force with Cyrptologic and the antiquated Ongame Network platform also ending up in Amaya’s hands in recent years.  The most honest read on the Amaya statement is that the company has made phone calls to lots of other firms, given its history, and that may include PokerStars parent Rational along with many other firms.  The rumors, though seem unlikely, and this may be a stock-price bubble getting ready to burst.

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