Amaya – Rational Deal Under Investigation

The Amaya Gaming Inc. had hit the headlines when it acquired The Rational Group for $4.9 billion. The Rational Group owns two of the biggest online poker rooms PokerStars and Full Tilt. The amount of positive publicity it has received was phenomenal. Now, the same event has delivered adverse publicity. Amaya Gaming has confirmed that the trading activity around that deal is under investigation by the authorities.

The offices of Amaya Gaming in Montreal were visited by members of the Royal Canadian Mounted Police and officials from the Autorite des Marches Financiers, the Quebec securities regulator. The company downplayed the incident, stating that as far as it was aware the investigation does not involve any allegations of wrongdoing. Amaya Gaming further averred that the enquiry will not have any effect on its business operations, employees or companies.

The authorities also visited the investment banker Canaccord Genuity and the insurance company Manulife Financial. Canaccord Genuity was one of the lead financial advisors on the acquisition of the Rational Group. A spokesperson for Canaccord said that this was a “routine” request for information by the Autorite des Marches Financiers and that the company was cooperating fully with the investigators. Manulife Financial also released a similar statement. A spokesperson for the Autorite said that the regulator does not comment on cases currently under investigation. The RCMP said it had merely provided security for the Autorite des Marches Financiers and that the unannounced visit was not a police raid.

The repercussions of this investigation on the online gambling industry will only be known in due course. Of particular interest will be how it impacts the attempts of PokerStars to return to the United States. However, the investors of Amaya Gaming on the Toronto Stock Exchange have reacted instantly. Amaya shares dropped nearly 29% to $25 in early morning trading, but recovered somewhat to close down just over 18% lower at $28.64. Exactly the reverse happened earlier this year when the Rational Group deal was concluded. Then the Amaya stock had more than quadrupled in value to an all-time high of $39.25.

Another large Canadian online gaming company Intertain was also affected. The Intertain Group's stock fell 26% to $10.70. Intertain clarified that it had not been approached by security, enforcement or regulatory agencies and that there was no material factor connecting it with Amaya Gaming’s drop. However, it is known that Amaya has acquired an ownership stake in Intertain and also 5% of its unsecured debt.

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