Tom Meeker, president and chief financial officer for Churchill Downs, said he felt the deal was positive for his racetrack and the racing industry. Churchill Downs in Louisville, Ky., has an exclusive agreement with TVG."By joining forces, TVG and Youbet.com have set forth a strategy that should further develop the emerging in-home wagering market while maintaining an economic system that is positive for all aspects of the industry."Youbet.com's stock reacted strongly to the news. The stock, which closed at 75 cents per share May 18, jumped 101% to peak at $1.51 within the first hour of trading May 21. Volume was heavy at 1.3 million compared with its 100-day average daily volume of 41,700 shares.
Youbet.com has signed a deal that could give the Television Games Network a majority interest in the online horse racing and wagering service. Under the terms of the agreement, Youbet.com will pay TVG fees based on the handle. Youbet.com also has issued warrants allowing TVG to buy 19.9% of the online service's 19.4 million shares of common stock for 1/10 of a cent per share, or a total of $3,860. The warrants can be converted to stock within 36 months. TVG may be able to purchase another 31.1% of outstanding common shares, raising its stake in the online company to 51%, if Youbet.com shareholders give their approval. If stockholder approve the second warrant, TVG would pay $2.50 per share--though the amount is subject to adjustment. Again, TVG would have 36 months to convert the warrants to stock.Robert Fell, chairman and chief executive officer for Youbet.com, said the deal fills in the critical gaps in his company's service."Through this relationship, we gain access to a highly concentrated group of premier tracks affiliated with TVG," Fell said. "Youbet subscribers will now enjoy accessibility to virtually 100% of the industry."TVG, which is owned by Gemstar-TV Guide, has exclusive agreements with 26 of the country's leading racetracks.Mark Wilson, president and chief executive officer for TVG, said the deal is an important part of his company's growth strategy and a boon to states where TVG pays or has contracted to pay source marketing fees."Youbet.com also has agreed to adopt the TVG/NTRA Services source market fee revenue sharing program, which is an important element...for providing fair compensation to racetracks, horsemen, and breeders from wagering," Wilson said.Racetracks on the TVG network will be available to Youbet.com customers once the online service establishes a wagering hub in Oregon, which should happen within several months. When Youbet.com begins taking wagers from these tracks, then breeders and horsemen in 15 states become eligible to receive a portion of Youbet.com wagers.