As many may know, the AIM market has seen a number of great opportunities over the years, but also its fair share of disasters. We take a look at an interesting company which fits a high-risk, high- reward investor profile: Webis Plc.
To understand what Webis is, investors need to understand the fairly complex corporate changes to the US gambling industrythat have been ongoing for a number of months now. The State of New Jersey was the first state to adopt legislation allowing sports betting after the US Supreme Court overturned a federal bill banning the practice in May 2018. The US has seen mixed fortunes with the gambling industry, with connections with corruption and mob interference over the years. The path for regulation was set in 1992 with the professional and amateur sports protection act that outlawed sports betting in America in all but a few circumstances.
Now, in a scene that is akin to the gold rush of the 1800s in the US, the market is now opening up with the opportunity to legalise sports betting across a number of states. The US currently has already 14 States that have legalized its stance of Sports betting with another five pending clearly the opportunity lies in companies that are exposed to this potential growth sector. The market analysis makes for interesting reading, the official statistics value the gambling industry in terms of sports betting to be worth up to 8.1billion by 2024, unofficial figures though value the current market in illegal sports betting to be worth somewhere near $150billion, so clearly there seems to be a conservative estimate of the market once legalised.
The process of legislation and de-regulation has taken a long time, the current status progress has been seen to be the work of a New Jersey Lawyer Dennis Drazin who has campaigned and lobbied for deregulation of a number of years. He is also the Chairman of Monmouth Park racing track in New Jersey.
European operators are scrambling to take part in the action, with UK and Europe seeing a number of regulation restrictions coming in such as the FOBT stake reduction, the market is looking further across the pond for potential growth. Companies like Paddy Power, now rebranded as Flutter Entertainment, believe there to be a big opportunity, with their r
ecent 10billion deal with Stars group which would make them one of the biggest players in the US if regulators pass the tie-up. How this all connects to the small microcap that is Webis is simply the fact that Webis is a gambling company operating two arms, once which is a real-time horse-racing wager company called Watch & Wager, and another is there actual horse racing operations in California through Calexpo Harness racing.
Webis holds licences to operate races Watch and Wager has been operating live racing at Cal Expo since 2012. The 2019- 2020 Cal Expo Harness Racing season will begin on Saturday, 9 November 2019. The licence is due to be up for renewal in 2020 April, which by previous history looks to be having a good chance of success. If California was to obtain gambling deregulation like the other states, Webis stands to benefit massively from this move. As from Webis being an attractive takeover target because of the core key licences held, the company is also very volatile due to
the fact that around 71% of the stock is with institutions. With such limited free float, the stock is capable of spectacular moves, in one week in 2018 for example after the news for deregulation came through the stock went from 1p to 8p in one week. With plans afoot, a lot depends of the state of California, which seems to be very slow on the uptake to move with the times.
Besides boasting a population of almost 40 million, California is also the country’s wealthiest state. In fact, if it were a country in its own right, its $3 trillion economy would be the fifth-largest in the world.
Realistically the passing of state sanctioned gambling in California is a long way off, with predictions we would see a move possibly in Nov 2020 at the earliest, but if investors are patient the wait may be worth it, as Webis today stands at 1.6p with an unbelievably small market cap of 6million and most of the shares in institutional hands, then may be the argument to get them whilst they’re cheap.
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