Amaya Gaming, along with two investment firms, are the subjects of a securities probe being conducted by Autorité des Marchés Financiers (AMF) according to Forbes Nathan Vardi.
According to Vardi’s report, the AMF along with the Royal Canadian Mounted Police raided Amaya’s Montreal headquarters on Wednesday, as well as the offices of investment firms Canaccord Genuity and Manulife Financial.
According to Amaya, the investigation stems from trading in the lead up to their $4.9 billion acquisition of Rational Group, the parent company of PokerStars. The AMF is tasked with regulating the province’s (Quebec) financial sector, not gaming regulators.
“Amaya is cooperating in an investigation by the Autorité des Marchés financiers (AMF), the securities regulatory authority in the Province of Quebec,” Eric Hollreiser, the Head of Corporate Communications for Amaya told Forbes. “It is not appropriate for us to provide any further details at this time.”
Amaya issued a lengthier statement later in the evening to quell the rampant speculation about the investigation, which many hypothesized had to do with PokerStars operating in Canada’s gray online poker market:
“To provide clarification on a media report, Amaya Inc. (the “Corporation”) (TSX: AYA) confirmed that the Corporation and its officers are cooperating with the Autorité des marchés financiers, the securities regulatory authority in the Province of Quebec (the “AMF”), in an investigation with regards to trading activities in Amaya securities surrounding the Corporation’s acquisition of Oldford Group in 2014.
“To the Corporation’s knowledge, this does not involve any allegations of wrongdoing by the Corporation. Amaya will continue to cooperate, if and as requested, consistent with our practice to always cooperate with regulatory authorities.
“The Corporation will continue to monitor the investigation if and as it proceeds. The investigation has had no impact on Amaya’s business operations, employees or companies.”
Looking back at the weeks leading up to the purchase of PokerStars, it’s unsurprising that the AMF is conducting an investigation.
On May 24, 2014, CalvinAyre.com was the first to hint at a potential sale. The report by CA’s Steven Stadbrooke, stating Amaya Gaming had an agreement in place to purchase PokerStars came out of nowhere and caught many people off guard.
CalvinAyre.com’s speculation, and the reason the rumor gained traction, was fueled by the stock increase Amaya experienced between May 14 and May 24, where the price jumped from around $7/share to $10/share.
At the time the idea that Amaya would be purchasing PokerStars was widely considered outright speculation, but it would eventually turn out to be correct a few weeks later, and in hindsight, the curious trading almost certainly raised some red flags.
Over the next two weeks the stock price held relatively steady, before once again surging as rumors of the sale heated up and went from rumor to reality.
By the time the sale was officially announced on June 12, Amaya’s stock was trading at $15/share – double what it had been trading at just a few weeks earlier. With such a flurry of activity, and the persistent rumors of a major acquisition eventually led to trading of Amaya stock called to a halt on June 12th.
Amaya stock closed at $30 on Thursday. Trading on Friday should provide some indication of how concerned investors are with the investigation.
UPDATE: Amaya shares dropped 25% at opening on Friday:
— Adam Krejcik (@akrejcik) December 12, 2014
Shares have already rebounded slightly, down just 15% at 9:40 AM EST.
If the investigation is what it appears to be, it’s unlikely to have a long-term impact on Amaya Gaming’s U.S. plans.
That being said, the addition of an ongoing securities investigation is likely to keep PokerStars on the sidelines in New Jersey, and will provide plenty of fodder for PokerStars California critics.
It seems to be in Amaya’s best interests to bring this investigation to a close as quickly as possible.
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