Amaya Inc. Prepares for New Jersey Re-Entry Amid Continued Controversies

Amaya Inc. (TSX:AYA)(NASDAQ:AYA) is preparing for re-entry into the New Jersey market within a month, while it deals with a Kentucky lawsuit appeal and potential buy-out rumours.

The Motley Fool

There has been no shortage of news regarding Amaya Inc. (TSX:AYA)(NASDAQ:AYA) of late. The company is in the process of appealing a court case in Kentucky, is preparing to enter the New Jersey market, and has been the subject of recent talks that could potentially see the company go private or be sold.

That’s a lot of news that could send the stock in either direction. Let’s take a look at each and see what the impact is to shareholders.

Amaya vs the Commonwealth of Kentucky

Back in 2010, prior to Amaya owning the PokerStars brand, a lawsuit was initiated by Kentucky to seek recovery of losses for the state’s residents who played and lost money during the 2006-2011 time frame.

The initial ruling was a US$290 million award and has since been trebled by the judge. From Amaya’s standpoint, the initial US$4.9 billion price Amaya paid for PokerStars included a $300 million allocation for the case.

The absurd part is that PokerStars generates a minuscule US$18 million from Kentucky, so the ruling of $870 million is way out of context. Amaya filed a notice of appeal on that decision this week, and there’s surely going to be more news about this case in the coming months.

At this point, the court case has had little impact on the stock price. After the initial ruling, the stock did take a hit, and the decision is arguably already priced into the stock. Should the appeal be favourable to Amaya, expect the price to shoot upwards.

Re-entry to New Jersey

Last year Amaya received approval to allow New Jersey residents to play Amaya’s online gambling games. That approval came with a bunch of conditions, such as tying the game to casinos in New Jersey and limiting the play to only those in New Jersey.

Amaya appears to have met all of those conditions and is ready to pull the switch and allow the citizens of the Garden State to gamble online with a date tentatively set for this March.

For shareholders, this means a new source of revenue that could prove very lucrative. There are other states lined up to get approval, and each of these could bring tens of millions more revenue for the company.

Buy-out rumours

Chief Executive David Baazov has been pondering a plan to take the company private in a $2.8 billion bid that would turn Amaya into a private business. It could be an appealing option as there would be fewer obstacles to prevent the company growing.

Regulatory hurdles would lessen, and the company’s valuation would not be constantly in fluctuation based on the emotions of shareholders and the portrayal of the company by the media.

It is an appealing option, but that $2.8 billion is assuming that the company is worth $21 per share. As recently as November, the company was trading north of $30 but dropped sharply after Amaya announced weak results for the year. Since Baazov announced his intent, the stock has surged 30% to the current level of $19.

Whether or not the sale will occur is something that will be revealed in the coming days or weeks. If the sale does go through, the company will be less tied to the public eye and will be able to grow at a greater rate. If the sale does not go through, the company will still grow, particularly if approvals from other states that allow residents to gamble are passed, but then Amaya will be subject to greater scrutiny.

A wait-and-see approach is probably best at this time for shareholders.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.

More on Investing

profit rises over time
Dividend Stocks

A Dividend Giant I’d Buy Over TD Stock Right Now

TD stock has long been one of the top dividend stocks for investors to consider, but that's simply no longer…

Read more »

ways to boost income
Energy Stocks

Act Fast: These 2 Canadian Energy Stocks Are Must-Buys Before Year-End

Here are two high-potential Canadian energy stocks with stable dividends you can consider adding to your portfolio before the year…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Investing

Should You Buy the Post-Earnings Dip in Dollarama Stock?

Following positive Q3 numbers and future growth prospects, should investors accumulate stock in this popular retailer on the pullback to…

Read more »

analyze data
Dividend Stocks

Top Financial Sector Stocks for Canadian Investors in 2025

From undervalued to powerfully bullish, quite a few financial stocks might be promising prospects for the coming year.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

3 TFSA Red Flags Every Canadian Investor Should Know

Day trading in a TFSA is a red flag. Hold index funds like the Vanguard S&P 500 Index Fund (TSX:VFV)…

Read more »

sale discount best price
Stocks for Beginners

Have $2,000? These 2 Stocks Could Be Bargain Buys for 2025 and Beyond

Fairfax Financial Holdings (TSX:FFH) and another bargain buy are fit for new Canadian investors.

Read more »

Rocket lift off through the clouds
Stocks for Beginners

2 Canadian Growth Stocks Set to Skyrocket in the Next 12 Months

Despite delivering disappointing performance in 2024, these two cheap Canadian growth stocks could offer massive upside in 2025.

Read more »

Beware of bad investing advice.
Bank Stocks

Shocking Declines: Canadian Stocks That Disappointed Investors in 2024

TD Bank and Telus International are two TSX stocks that are trading below 52-week highs in December 2024.

Read more »