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How low will it go?
In the movie Wall Street, Gorden Gekko architects a scheme to drive up the price of Anacot Steel. He’s aided by Bud Fox, a naïve wannabe player, who makes a phone call to put the stock into play: “Blue Horse Shoe loves Anacot Steel.”
Today Lakes Entertainment, Inc., Indian casino developer and majority shareholder of WPT (World Poker Tour) Enterprises, Inc., announced that it had received notification that it would be delisted from NASDAQ as of August 10th, 2005. The reason for Lakes delisting was for failure to file its Annual Report on Form 10-K for the fiscal year ended January 2, 2005 and its Quarterly Report on Form 10-Q for the quarter ended April 3, 2005. The delay in filing is due to problems stemming back to comments that Lakes received from the SEC staff pertaining to Lakes' Annual Report on Form 10-K for the fiscal year ended December 28, 2003. These comments relate to Lakes' accounting for development costs and advances to Indian tribes for the development of casinos as assets on its balance sheet.
On the face of it, this is not a good thing. Investors and market exchanges never like it when the SEC identifies what they believe to be accounting irregularities. And they like it even less when a company can’t resolve an issue with the SEC in nine months time. But a delisted stock is doomed, as investors back away from the less regulated and thinly traded company. But as bad as it is to be delisted, it will only get worse as questions resurface relative to the bizarre buyout bid allegedly received by WPT Enterprises just last month.
On July 7th, WPT Enterprises, Inc. received an unsolicited cash bid of $700 million which was a stunning 100% premium over its trading price. The source of the bid was reported to be from a group of investors, headed by none other than poker legend Doyle Brunson. The stock jumped over 50% on the day of the announcement. But the bid was reported to have officially expired on July 12th when no further information or details of the bid could be confirmed.
The ephemeral buy out bid caught the eye of Motley Fool’s Lawrence Meyers who wrote, “One thing is certain -- WPTE stock flew and then plummeted when the buyout offer dissipated as quickly as a mirage in the Vegas desert. Was the offer a fraud? A new twist on the old "pump and dump" scheme? Or was there real money behind the offer that suddenly dried up for as-yet-unknown reasons? In my years of watching the markets, I've never seen an offer made to buy a company with no details included in the bid. Something just doesn't add up. Until the full details become clear, we can only speculate on the reasons behind the phantom offer.”
To begin with, there were few credible scenarios that explained the bid premium. The poker television market was beginning to saturate. According to Nielsen, the television rating service, WPT had 985,000 viewers per episode in 2004, but was down to 888,000 to date this year. They are still strong, but hardly the directional trend that would prompt the premium. There was some spin about Party’s recent offering and valuation and the potential parallel with WPT’s recently announced online site. But online poker is already seeing consolidation and the WPT would be a late entry into a competitive market. And the success and competition from the WSOP Circuit events was already in evidence. The bid just didn’t make sense.
But in today’s light it only looks worse. Who knew what when? Lakes had to know it was in violation of NASDAQ’s listing requirements. They had to know NASDAQ would have to drop the boom. Did someone contact a friend for a little temporary stock push so they could cash? You see, just like an action flop, even if it is just an unfortunate random occurrence, it looks rigged. It may be just an honest coincidence; a freakish ungodly one outer. And for the sake of the industry, that’s what I hope we’re dealing with. I always thought the scandal that would rock the poker world would involve chip dumping. I never worried about stock pumping. Please don’t make me worry about that now.
Some people I’d rather not be when the SEC starts knocking on doors: any insider that sold shares while the “bid” was in play, Attorneys David Chesnoff and Oscar Goodman, whose law firm conveyed the bid to the WPT, Lyle Berman or Doyle Brunson.
But most of all, I wouldn’t want to be some dumbass outsider stockholder wondering what the hell I’m going to do with my stock now.
amy@pokerpages.com
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