Full Tilt Poker: Back of the Envelope Calculations
aka "Why GBT May Be Smarter Than We Think"
The finances of Full Tilt Poker, a closely held corporation that didn't have to answer to any meaningful regulatory authority, were always opaque. Every once in a while the curtains briefly parted, giving us a glimpse of what was going on behind them. But it was only a glimpse, to the point that many in poker were surprised by allegations the DOJ made in September about FTP's finances.
One number I've seen tossed around in a few places: after Black Friday, but before June 29, 2011 (the day the AGCC suspended Tilt's gaming license), ROW players on Full Tilt were generating $1 million in revenue for the company. Daily.
Think about that. Without the US, estimated to be 60% of Tilt's revenue, and after the chilling effect on the "Big Three" caused by Black Friday, Tilt was still doing $1 million of business a day from ROWers. How much money was the company grossing *before* Black Friday? It boggles the mind.
$1 million a day. $365 million a year. $1.825 billion in 5 years. If you assume that Groupe Bernard Tapie are able to cut costs (they've already started by making certain employees redundant, and they won't have to worry about Ray Bitar ordering $500 bottles of wine with every meal) GBT could easily achieve profit margins of 20-25%, generating $400 million in EBITDA over the next five years. And at that point the value of the company could be close to $500 million dollars.
That's with no growth. If the company is able to grow, revise both of those projections upwards. At modest 5% annual growth, add $60 million to EBITDA and $100 million to the company's valuation. The five-year return on GBT's $600-$650 million investment ($300 million to cover player deposits; potentially $300 million to the DOJ paid over three or four years; $50 million in operating capital) could be as much as $1.060 billion, or roughly a 12% annual compounded ROI. That'd be great in any market, never mind one marked by as much volatility and uncertainty as exists today.
These projections assume, of course, that ROWers will return to Full Tilt if/when it begins operating again. Not having a license for the last four months, and thus not being able to operate, has undoubtedly hurt Full Tilt's market share. For that matter, the entire scandal that has precipitated the potential acquisition of FTP has also hurt its market share. There are no guarantees if/when FTP resumes operations that it will be able to generate anything close to $1 million a day in revenue.
Still, when you look at the raw numbers, you can see why GBT is interested in acquiring the company, even in light of its damaged brand and reputation. A little bit of luck and a lot of hard work could make GBT a big winner a few years down the road.