Facebook Twitter Email
TUESDAY, JUNE 18, 2002

The stock of a casino game company with close ties to the $10 billion Indian gaming industry fell several percentage points yesterday despite optimism over new federal rules seen as favorable to tribes.

Multimedia Games Inc. (NASDAQ:MGAM) of Austin, Texas, closed at $28.50, down $2.22. The 7.23 percentage drop was notable in a day filled with heavy trading of technology stocks that lifted the market up by 3.2 percent.

Multimedia is still considered a good investment, according to top-rated gaming market analysts. Hibernia Southcoast Capital's Daniel Davila, whose picks earned him second place on The Wall Street Journal's casino survey, recommended the stock as a "strong buy" for the entire year.

The company is a primary supplier of casino machines to Indian Country. A specialty includes the controversial Class II category of games, which tribes can operate without state involvement and which are the subject of new federal regulations.

Pointing to the rules, which were announced at a tribal sovereignty conference and reported by Indianz.Com last week, Multimedia chairman and chief executive Gordon T. Graves yesterday acknowledged the landscape of the tribal casino industry was in for changes. "Even though this clarification will probably mean stronger competition for MGAM, it is good for Indian Country and good for American gaming," he said.

"[Our] management firmly believes whatever is good for Indian Country usually turns out to be the best for MGAM," he added.

Graves also was optimistic that company earnings would be strong amid potential market challenges. He forecasted that MGAM stock would net $1.75 per share for fiscal year 2002.

Multimedia earned 57 cents a share the year prior.

Graves downplayed pressure tribes are feeling over the operation of MegaNanza, one of his company's dispute Class II games. The National Indian Gaming Commission last week ordered several Oklahoma tribes to remove the machines or face federal fines, violation notices and closure.

According to the company, one tribe was indeed charged with violating federal regulations. The tribe shut down its MegaNanza games yesterday, Graves said.

"The procedure followed in this notice of violation was unusual and prejudicial to the tribes and MGAM," he said

The tribes and the industry are banking on the new rules to allow the "grandfathering" of the MegaNanza game. Such an administrative move would bring the machine into the Class II specter.

The NIGC in April classified the machine as Class III. Multimedia stock fell more than 25 percent after the news. The company is challenging the decision in federal court.

Tribes cannot operate the game without a tribal-state compact. With the exception of off-track betting, Oklahoma forbids Class III gaming.

Relevant Documents:
Federal Register Notice (6/17) | Deer Dissent (6/8) | MegaNanza Advisory Opinion (4/15)

Relevant Links:
Multimedia Games - http://www.multimediagames.com
National Indian Gaming Commission - http://www.nigc.gov

Related Stories:
Tribes defy federal casino order (6/17)
Objections to casino rules overruled (6/14)
Tribes seek limited federal role (6/13)
Tribe's land approvals questioned (6/11)
NIGC overturns gaming decision (6/6)
Authority of NIGC placed in doubt (5/10)
Authorities seize tribal records (5/7)
Tribes complain about gaming rules (4/29)
Disputed gaming policy advanced (3/22)
Gaming commission ignoring Norton order (1/28)
States object to proposed gaming policy (9/20)
NIGC takes a gamble on new regulations (7/26)