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The Business of Poker - Poker's Wildest Ride

The Business of Poker - Poker's Wildest Ride 0001

Right in the middle of the main event of this year's WSOP, it was reported that Doyle Brunson was making an unsolicited bid to buy World Poker Tour Enterprises (WPTE). Needless to say, the move raised eyebrows, and even during poker's premier event, it qualified as Big News. However, as quickly as the news came... it went. Less than 48 hours after the story hit the wires, the law firm representing Brunson's "group" withdrew its participation from the process. And less than a week after the news broke, the offer and its accompanying buzz died an unceremonious death, leaving behind nothing but a deafening silence.

After the WPTE's stock price had levelled off from its rumor-fuelled ride, cries of "pump and dump" were heard from several business insiders. Interestingly, potentially damaging accusations of stock-price manipulation fizzled quickly and everyone involved has escaped relatively unscathed.

My two cents on this deal was this was not any kind of "pump and dump" or manipulation scheme - all involved here are way too smart (and way too wealthy) to pull something like this for short-term gain. My guess is that this deal was about privatizing WPTE, so their new online gaming site could take U.S. bets, and take advantage of the fact that the WPT is the sexiest brand in poker. Because WPTE is traded on a U.S. exchange, the company can't accept American players on their site. If that situation were to change, with the marketing monolith that the WPT has become, they would instantly become a major player in the incredibly competitive (and hugely profitable) online poker space. Again - this is just my own speculation - I have not talked directly to anyone involved.

Of course, a big part of this story is Lakes Entertainment, a publicly held company with a a myriad of gaming holdings under its belt, the most high-profile, though not necessarily the most profitable of which is its majority stake in WPTE. Making matters even more interesting is the fact that Lakes CEO is Lyle Berman, a longtime friend of Doyle Brunson. To me, despite the "unsolicited" nature of the buyout offer, it seems clear that Berman and Brunson wanted to work together, but there were just too many roadblocks complicating things to get this deal done. If you'll recall, Berman originally offered Brunson an investment in the WPT before it launched, a missed opportunity that Brunson has always publicly regretted.

Fast forward to a month after the failed bid: NASDAQ sends a delisting notice to Lakes Entertainment over the company's failure to file certain forms. Interestingly enough, this non-compliance resulted from SEC comments over an earlier filing, where Lakes had listed certain development costs relating to an Indian casino as assets on its balance sheet. Apparently, Lakes was awaiting further resolution of these earlier comments from the SEC before filing the needed forms.

Surely, NASDAQ was aware of this issue, so this strikes me as odd timing — just after the failed bid and the resulting short-term price fluctuations. You have to really try to get thrown off a stock exchange, and I have to wonder if other companies have been delisted while waiting for SEC comments. Was this delisting really about the timely filing of forms? Or about the events 30 days prior? The people at NASDAQ did not return e-mail seeking comment.

Probably the strongest statement about what this is really about is the stock price of Lakes. One would assume a delisting would crush the stock price, yet the stock (traded for one day after the notice was sent on the NASDAQ, and currently trading OTC) has only lost about 10% of its value. It seems that were there to be real scandal here, the stock would have taken a much bigger hit.

Either way, it has been an interesting five weeks for Lakes Entertainment. Keep watching this story as it continues to develop...I know I will.

Until next time....Play to Win.

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