Leader in sports lottery500.com Ltd ( WBAI) is a Chinese company that provides online sports lottery services. At the end of last year, it was launched as the sole licensee holder in sports lottery in China. 500.com has a market cap of 1.2 billion and trades at 37x P/E. Since its IPO in November 2013, WBAI’s stock has gained over 80%. Some of the hedge funds who have positions in 500.com are Steve Kuhn’s Pine River Capital and Millennium Management. Short interest peaked around mid-May and is just around 3% as of August 15. 500.com’s success in FIFA Early in the year, 500.com was marred by reports that its license had legal issues. However, Sports Lottery Administration made a statement in May that cleared the lottery company of any legal troubles. In a report from Deutsche Bank, analysts Alan Hellawell and Vivian Hao said that 500.com had used the FIFA World Cup as its staging ground to put forward new activities and games which gained popularity among customers. 500.com Ltd ( WBAI) is also set to obtain mobile welfare lottery licenses later in the year which will be another stepping stone for the company. While the company reported 2Q profits in line with analyst estimates, Deutsche Bank said in a report from August 11,
“Issues remain around lottery licensing and other matters. The national sports lottery initiative could drive up prize payout ratios and thus lead industry commission rates to decline. WBAI could suffer from the potential rate cut; the time line is not clear.”The company is the only player that is an officially licensed commercial operator of online sports lottery. When new licenses will be issued to other entrants in this field, it could be a risk to 500.com’s business, said Deutsche Bank’s analysts. DB rates the company at Hold because it had eclipsed its price target back in May.