The City clearly believes it is backing a winner with the flotation of PartyGaming - London's biggest stock market listing for the best part of five years. Only time will tell whether its lucrative short-term punt will turn out to be a lengthy long-term liability.

Having been asked to declare its hand this morning when the shares began conditional dealings, the response in the Square Mile appeared pretty categorical.

Fund managers brushed off any concerns they might have had about the legality of online gambling in America like so many specks of dust gathered on the roulette table. After the offer price for the shares was set last night at 116p, professional punters soon pushed up the stock to 125p - a 7.75 per cent premium to that offer price that values the owners of PartyPoker at almost £5 billion.

That means that the managers of our pension funds believe PartyGaming is worth fractionally more than Rolls-Royce (£4.9 billion), ITV (also worth £4.9 billion), and Ryanair, (£4.95 billion). The world's largest online poker group is also now more valuable than William Morrison, the supermarket group with a market capitalisation of £4.85 billion that is, admittedly, struggling.

Those in the know on PartyGaming's float say that fund managers welcomed the new issue with open arms in the full knowledge of all of the downside risks. Indeed, they say that the bankers at Dresdner Kleinwort Wasserstein running the float could have priced the shares higher if they had so chosen.

Demand for the shares was more than three times the 781.6 million on offer and about three-quarters of investors sounded out in last week's roadshow placed orders for the shares.

And by all accounts, top-quality institutional investors made up about 75 per cent of the book of share buyers, with the remainder of orders coming from blue-chip investors in continental Europe. The shares were not sold in the United States, where the regulatory issues lie, of course; nor were individual punters able to subscribe for shares in advance.

The selling shareholders at PartyGaming's float, including founders Anurag Dikshit, husband and wife duo Ruth Paraso and Russ DeLeon, and Vikrant Bhargava, are also likely to be celebrating the continuation of their winning streak today. The sellers of 23 per cent of PartyGaming are now worth a collective £1.15 billion based on today's price rise. That's not bad for a disparate band of people, some of whom have software expertise and others who previously made their money selling live porn on the internet.

The market also seemed to deliver the message that it has no concerns about their cashing out their stakes at the float; nor about the fact that they will still retain a controlling interest of 77 per cent of the shares.

So does this mean that all of those regulatory fears were overblown?

Well, for starters, none of the FTSE 100 companies named above faces the threat that part of their business - and a part that accounts for about 80 per cent of revenues - has been ruled illegal and is frowned upon to say the least by federal authorities in America.

The fact is that those regulatory concerns are real, as indeed they are for any internet betting service that might attract some gambling interest in the United States. Despite various rulings, American federal authorities are clear that online gambling is illegal, even if the true status according to others, including from the World Trade Organisation, is far less certain.

What has happened today is that, after taking a clear look, the City has decided not to worry about it. The suggestion also is that fund managers did not buy PartyGaming shares because they had to track the group's entry into the FTSE, but they bought because they felt confident in the growth prospects for the company.

Let's hope that the City - which has been caught napping more than once in the past - is right today. That £5 billion of market value is a lot of pension fund money.

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