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David Baazov is at it again.

The Amaya CEO already managed to completely alter the poker industry landscape by taking PokerStars public in 2014. Now, he’s floating the possibility that he might do the same thing all over again — only this time, in reverse.

That’s because a story on today’s PRNewswire says that Baazov is once again looking to purchase PokerStars, only this time with the intention of taking it private.

You can either love the guy or hate the guy for the direction the PokerStars brand has gone on his watch. To say I have been critical in my musings for PokerUpdate is a bit of an understatement. But even I have to reluctantly tip my cap and admit the man is fearless — and willing to take huge risks that other people wouldn’t even dream of.

Although the deal is far from completed, reading between the lines of why it would even be suggested as an idea can give us some insight into the business discussions currently going on behind the scenes at PokerStars.

Are International Operations Currently In Jeopardy?

The most obvious reason for why Baazov would want to take PokerStars private is government regulation, which has proliferated across the globe at an alarming rate for industry operators.

But there is an important distinction to be made here. While taxes and licensing fees may cut into profits, they are a reality for any legitimate operator. The real issue right now for PokerStars is that the company currently relies on operations in several “grey” markets – most notably Russia – where the legality of offering online poker at all is not even close to being assured in the long term.

A company listed on a public stock exchange in the United States (PokerStars is listed on the NASDAQ) is subject to strict compliance with the law. Should Russia (a country not exactly known for its predictable politics) decide tomorrow that PokerStars’ business model is illegal, they would be forced by US law to exit from the market. The same would not be true for a privately held company, which could operate (albeit at their own peril) only subject to the criminal and civil penalties in any country where they violate the law.

PokerStars

Is PokerStars’ Entry into NJ More Important than Its International Operations?

Much fanfare was made about the recent granting of a provisional license for PokerStars to operate in NJ. Getting a foothold into the US market is presumably one of the main reasons why Baazov decided to acquire the company in the first place. If PokerStars were to be taken private, it’s highly likely that the entire process would need to be undertaken for a second time.

This could seriously harm the chances of the new, privately held company from ever dealing a single hand within NJ or anywhere else in the USA. The New Jersey Division of Gaming Enforcement (NJDGE) is one of the most professional regulators in the world. That being said I’d imagine the NJDGE is most likely not amused at the prospect of having its months of painstaking work vetting the current incarnation of PokerStars rendered entirely worthless. Let’s just say I wouldn’t want to be the guy or girl representing PokerStars in the meetings restarting the licensing process from scratch.

But does this even matter? Does PokerStars think that remaining flexible to operate in the worldwide markets is important enough to jeopardize its entry into the US? If so, that would definitely be a seismic shift in the conventional wisdom about the company’s long-term strategy.

Are Shareholders Killing Innovation?

The poker industry is currently undergoing a transformation. Old business models are being disrupted by the need to shift focus away from the hardcore “grinders” and towards a recreational player base. It can be challenging for a company to keep revenues steady – much less grow them – during a period of heavy innovation.

But that is just the challenge that Amaya currently finds itself up against. The reality is that shareholders do not want to hear that you are investing in a new strategy that will secure market share in the future. All that they want to hear about is profits, and they want to hear about profits now.

It’s possible that this is the underlying tension behind the recently botched dismantling of the PokerStars VIP Club Supernova Elite tier. A company with a long term vision might have gradually phased the program out, balancing the need for immediate revenue with the longer term customer service and public relations considerations. A publicly traded company facing lackluster earnings for the current quarter may not have that luxury.

But in today’s climate, it appears that PokerStars might believe that innovation is essential to long-term profitability.

Intrigue and Waiting 

It should be stressed that nothing right now is final. There are also several purely business related theories involving the market’s valuation of Amaya circulating right now that might explain what is motivating Baazov to float this idea right now.

But whatever the reason, it’s clear that there will be a lot of people closely watching this latest chapter in the seemingly never-ending saga of the world’s largest online poker site.

PokerStars

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Bradley Chalupski

Bradley Chalupski made his first deposit onto an online poker site in 2009 and has been paying rake and following the poker scene ever since. He received his J.D. from the Seton Hall University School of Law in 2010.

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