PCG Entertainment Aims to Raise China Online Poker Capital

December 6th, 2014 | by Jason Reynolds

PCG Entertainment China online poker market

PCG Entertainment is trying to profit off China’s untapped online poker market. (Image: in.linkedin.com)

PCG Entertainment, a company that hopes to raise enough funding to make its mark on China’s online poker scene down the line, was off and running when the company’s shares rose by two percent on its first day of public trading on the London Stock Exchange’s Alternative Investment Market (AIM: PCGE).

PCG is a global gaming company headquartered in Gibraltar, a British overseas territory located on Spain’s southern edge. The public offering was initiated in order to raise capital as the company sets its sites on providing online poker to China‘s 1.3 billion residents.

During the first trading session, 527,000 shares were exchanged, raising Â£3.4m. With the placing of some 24 million new ordinary shares and a subscription of 32.5 million shares at six pence per, the group has a market cap of approximately Â£61.8 million.

Shares Up, Company Headed East

Organized with the mission of capitalizing off introducing online gaming to mainland China, PCG revealed its investment strategy will focus on developing the four licenses it holds through its subsidiary Sihai Geju.

The entertainment firm will use the financial assets raised in order to acquire the appropriate regulatory approvals from the People’s Republic of China. Once approved, PCG will attempt to use the licenses by partnering with two Hainanese companies, Hainan Huan’ao Culture Media (HPC) and Hainan Huan’ao Sports Industry (HLC).

HPC currently operates the Hainan Province’s Texas Hold’em tournaments, and owns the China Poker Games brand. It also hosted the 2014 Second Qingpingle China Poker Championship, the largest tournament in China. HLC is authorized to sell lottery products, which includes sporting events, and offers virtual sports games to the public. However, HLC is only permitted to have one physical location.

Mutually Beneficial Partnership

PCGE believes it can leverage the HPC and HLC brands in a way that would be favorable for all parties involved.

If the People’s Republic of China would grant PCG authorization, the British company would seek to manage online elements for both Hainanese firms. In addition to introducing online poker to the country, executives say the agreement would increase the total number of real world tournaments, while developing the China Poker Games Brand internationally.

It would also request supplementary permits to expand HLC’s sports lottery retail locations, develop more virtual games, and allow sales online and through mobile outlets.

CEO Nick Bryant says of the news, “There’s a great opportunity for PCGE to enable HPC and HLC to expand their operations online. We have also identified opportunities to distribute new broadcast events, games and promotions in the Chinese market which we plan to implement over the next 18 months.”

Bryant highlighted the fact that Â£164 billion is lost from PRC residents gambling at offshore and illegal onshore sites. “By expanding legalized onshore gaming and encouraging participation in state-run lotteries, the Chinese authorities are attempting to redirect this money into a legitimate, regulated and taxable environment. This, we believe, will give PCGE a considerable tailwind,” Bryant affirmed.

Profits Favor China

Chinese citizens wary of a British company entering their market need only look at PCG’s proposed profit structure to pinpoint the potential benefits to the world’s most populous country. Revenue generated from online poker would be paid at a rate of 90 percent to HPC, with Sihai Geju taking just 10. Card rooms would charge a fixed fee for virtual credits, with the winner receiving the pot in virtual currency.

With so much at stake, but profitability relying heavily on PRC authorities, shareholders stepped back on the second day. After a strong opening period of trading, PCGE shares fell on Friday to 6.25, a loss of 5.66 percent.