The sharp growth of the online betting sector came to a halt yesterday when shares in Party-Gaming, the world’s largest internet gaming group, fell 33 per cent.

The Gibraltar-based company, which generates 90 per cent of its profits from online poker, said customer growth had slowed while player retention rates and player yields had declined at rates “greater than expected”.

The warnings prompted fears that the online poker fad had come to an end. PartyGaming has been the chief beneficiary of the craze, with shares in the group enjoying a meteoric rise since its controversial listing in London in June.

The initial public offering was launched in spite of fears about the legality of online gaming in the US, PartyGaming’s largest market. But yesterday’s warning sent PartyGaming shares below the float price to close at 105p, valuing it at £4.2bn. The group is set to enter the FTSE 100 today in spite of yesterday’s share decline.

The downbeat assessment of PartyGaming’s growth prospects hit the shares of rival quoted online gaming groups, with Empire Online falling 11 per cent and Sportingbet closing down more than 16 per cent.

However,, an online casino operator that has launched a £700m IPO, said its float plans were unchanged. is less reliant on poker than PartyGaming.

John Anderson,’s chief executive, said: “In respect to our competition in the market place we have a very different business model.” But by July 2005, growth compared with the previous quarter had slowed to 4 per cent.

By Matthew Garrahan

More here.