Empire Online - the online gaming empire

This open letter has been sent to Mr Lanir, their brokers Numis, their PR company and the FT. I believe it puts the case succintly and I intend to 'sound out' a number of institutions in the new year re the requisitioning of an EGM -

Dear Mr Lanir

As a private investor in Empire Online holding a substantial number of shares, I am both shocked and disgruntled at your disregard for the rights of minority shareholders. Your announcement of 29 Dec 2006, selling the remaining gaming related assets and the preceding statement of 28 Dec 2006, whereby you stated that you intend to ‘invest opportunistically’ across the market cap spectrum in both public and private companies, without any consultation to other minority shareholders is outrageous in the extreme.

I am sure I speak for many ‘Secondary market’ investors, both institutional and private alike, who believed they were investing in an Online Gaming enterprise and that to overnight change the company’s remit (being a complete volte-face I would add from your recent statements) without dialogue is somewhat unpalatable. Particularly so given that we are now holding effectively a dollar denominated bank account and, a minority stake in PartyGaming.
Empire Online’s ‘listing’ is in London and not New York or Tel Aviv, consequently the vast majority of minority shareholders are likely to be sterling denominated. You are in turns forcing UK investors to hold the precariously placed US dollar (by way of the company’s dollar cash deposits) and, in eerie echoes of the ‘investment companies’ of the late 1920’s boom years on Wall St – by default also forcing us to invest in a very opaque manner in, as yet undisclosed companies over which we have no desire to invest – we could of course purchase innumerable investment trusts and subscribe to Private Equity funds in our personal capacity.

The events of early October and the effective outlawing of Online Gaming in the US was distressing enough for shareholders, without being forced to now endure your intended actions for the company. Given that the shares of Empire Online languish at an all time low and some 75% below the flotation price of 175p, I believe it is an affront to investors in the UK to allow them to face two stark choices, namely to either sell their shares for 80% of their cash value (43p versus the current cash value of approx 51p at present FX rates and PartyGaming’s share price) or, be forced into blindly investing in those areas you see fit and at your discretion!





Can you answer me the following questions too - what will the prospective Board of Directors comprise of following the asset sale, as an ‘investing company’ obviously doesn’t require a ‘padded’ and expensive Board? Why have you not explored avenues to return capital to those shareholders who wish to redeem their stock at the cash value and not the present ‘discounted’ market price.?

I sincerely believe Mr Lanir that this is the wrong way to ‘court’ the City of London on a medium term basis and is both short-termist, immoral and likely very damaging to your personal reputation and prospects of doing business here again.

A fair and appropriate course of action is to offer those shareholders who wish to exit the company and allocate their cash at their own direction, a ‘tender’ offer purchasing the shares back at the underlying cash value. In this scenario, those investors who wish to remain with you can remain so and those who wish for a graceful and realistic exit have the choice.

I would add that in the event that this course of action is not taken that I intend to requisition an EGM in order to propose the compulsory ‘tender’ offer for those shareholders wishing to redeem their £10 of shares for £10 and not £8 – which is the totally unnecessary choice facing us at the moment due to the present market ‘discount’.

I await your comments and would add that this is an ‘open letter’ to the FT too.

Yours sincerely