World Poker Tour Enterprises (WPTE) produces the “World Poker Tour” and “Professional Poker Tour” shows which air on the Travel Channel. The company also licenses the World Poker Tour brand for various consumer products and operates an online gambling site. After reaching a high of over 25 dollars in the summer of 2005 (after a bizarre Doyle Brunson-led bid for the company that quickly disappeared), the stock has plummeted to its current price of less than 4 dollars per share. At last, WPTE shares may be worthy of a look, if not a buy.
According to the latest 10-Q, the company has 38 million dollars in cash and investments, compared with total liabilities of just over 6 million. With a market cap of 77 million, that means that 42% of the market cap was backed up by net current assets. The non-cash backed (minus liabilities) market cap of the company is just 45 million dollars. So the question becomes “Is the World Poker Tour business worth 45 million dollars?”
First, WPTE was one of the only poker-related stocks not to get crushed after congress passed ban on onling gambling, mainly because its site prohibits bets from US customers. But will the World Poker Tour be affected by the ban, at least indirectly? Of course it will. If no one is allowed to play online poker anymore, interest in the WPT television shows will certainly wane. And with the show currently without a network for the next season, this may spell trouble.
According to CEO Steven Lipscomb at a presentation to investors on September 6th , “We’ve been out in the market talking to folks right now, and it’s a difficult market...what’s happened is a lot of the online sites are buying time on televison and that makes it difficult when you are going out saying ‘Here’s how much we’d like you pay us’ and they say ‘well we’ve got people paying us.’ We haven’t found a new partner for it yet.”
With the television show in limbo and at the very least facing considerably lower profitability, I would pass on WPTE shares for the moment. The company had announced that it was exploring strategic alternatives, but terminated the search on September 5th, presumably because there were no takers. But I will continue to keep an eye on the stock because it’s a well-known brand and if it slips closer to its net current asset value, it may be worth a gamble.
Zac's Blog: http://deepvalues.blogspot.com