Macau Casino Stocks Crimped by China Regulatory Crackdown

 Macau Casino Stocks Crimped by China Regulatory Crackdown

Shares of Macau concessionaires are slumping Tuesday, as Beijing continues clamping down on consumer and technology companies, prompting global investors to rapidly ditch Chinese stocks.

In midday trading, Las Vegas Sands (NYSE:LVS) — operator of five Macau integrated resorts — and Wynn Resorts (NASDAQ:WYNN) are both off more than four percent. City of Dreams operator Melco Resorts & Entertainment (NASDAQ:MLCO) is lower by six percent following a downbeat second-quarter earnings report that’s being amplified against the backdrop of the regulatory crackdown.

This year, the Chinese Communist Party (CCP) ratcheted up scrutiny of consumer-facing internet and technology companies, creating pressure on the related stocks.

Last month, Didi, the equivalent of Lyft or Uber in China, was listed on the New York Stock Exchange in a highly anticipated initial public offering (IPO). Soon thereafter, Beijing told the company to stop registering new customers and drivers, wiping out billions in market value in the process.

Last week, the CCP said it’s banning for-profit private tutoring services — many of which are publicly traded — stoking fears of a wider regulatory 에볼루션카지노 crackdown that’s seeping into Macau.

Macau Stocks Not Immune to Panic Selling

Already lagging due to the pace of recovery in the world’s largest gaming hub, Macau gaming stocks are getting caught up in the regulatory drama.

Tens of billions of dollars of market capitalization have been wiped off some of China’s largest internet companies, including Alibaba, Meituan, and Tencent, prompting some investors to ditch Chinese stocks. For example, Cathie Wood’s ARK Investment Management is selling positions in Chinese equities across its suite of exchange traded funds.

The regulatory clampdown, which started in earnest earlier this year when Beijing halted Alibaba’s plan to list its Ant Group fintech unit, lingers as Macau inches toward gaming license renewal. Permits for all six concessionaires come due next year, and the process is already delayed by the coronavirus pandemic.

Market observers previously expected the re-tender process would go smoothly, with the worst-case scenario being an extension of current policies until Macau authorities could more accurately gauge the recovery from the pandemic. However, the regulatory crackdown, which isn’t targeting gaming operators, is taking a toll, as highlighted by LVS flirting with its lowest levels in a year and Wynn hovering near its lowest price since February.

Gaming Sell-off May Be Overdone

Melco CEO Lawrence Ho points out that the industry is a critical driver of the Macau economy, and that concessionaires work closely with the government. Those could be signs these stocks are unfairly ensnared in the regulatory sell-off.

So I think it’s different from industries that are very new in China that deal with a lot of sensitive customer data,” he said on a conference call with analysts earlier today. “So whether it’s the education industry or tech. So I think on that basis, all the concessionaires have been working closely with the government for over the years. So I don’t expect any surprises, whether it’s right now or during the license renewal.”

He adds the gaming 온라인카지노 industry drives 80 percent of Macau’s tax revenue and employs a quarter of the special administrative region’s (SAR) working population.

Ex-Crown Director Claims Casino Inquiry Chair Forced Resignation

An attorney representing Former Crown Resorts director John Poynton testified today before a royal commission in Western Australia. He said that his client was unjustly pressured to resign from the Aussie casino business.

The Perth Casino Royal Commission resumed hearings this week. The commission is reviewing whether Crown Resorts remains suitable to operate casino gambling at its Crown Perth integrated resort.

The probe follows a royal commission in New South Wales deeming Crown unqualified to receive a casino license for its recently opened Crown Sydney. Another ongoing review has been initiated in Victoria regarding the casino firm’s suitability to continue running Crown Melbourne. 

Poynton resigned from the Crown Resorts board of directors and as chairman and director of Crown Perth in March. But his legal representative, Peter Ward, says his client’s departure from the organization was forced. Ward told the Perth commission that Crown board chair Helen Coonan forced the longtime Crown executive out.

Poynton himself is expected to appear before the commission this Wednesday, July 28. The casino inquiry’s report deadline was extended last week by four months, the final publication now due in March 2022. 

Poynton No Packer Puppet

Poynton became the director of Crown Perth in 2004. He joined the Crown board in November of 2018.

The NSW casino suitability investigation — informally called the Bergin Inquiry — concluded that Poynton was too close of a confidant to James Packer, the billionaire who founded and formerly served as CEO and chairman of Crown Resorts. The royal commission ruled in its decision not to issue Crown a casino license because Packer had too much control over the organization, and that resulted in regulatory adherence shortcomings. 

But in testimony today in Perth, Ward said that simply isn’t true.

“Until 2018, Mr. Poynton’s role was limited to that of a non-executive director,” Ward explained. “Mr. Poynton was appointed to the board of Crown Resorts as a nominee of Consolidated Press Holdings (CPH) in 2018 following the resignation of Mr. Packer.” 

CPH is Packer’s conglomerate holdings entity and owns a 36.8 percent stake in Crown Resorts.

There was no evidence before the Bergin Inquiry and no suggestion that Mr. Poynton has ever been beholden to Mr. Packer. There is no suggestion that Mr. Poynton ever shared information with Mr. Packer from the Crown Resorts board meetings… He acted independently,” Ward declared.

Ward says Poynton resigned not because of any wrongdoing, but as a result of being “placed under significant pressure by both the chair of Crown Resorts and the NSW regulator.” 

In Crown’s announcement of Poynton’s resignation, Coonan conceded that no evidence was found that he acted inappropriately. 

“As a result of … a perceived lack of independence arising out of his past relationship with Mr. Packer, John has agreed to resign in the best interests of Crown and our shareholders, despite no adverse findings by the Commissioner in the Inquiry in relation to his suitability, integrity, or performance,” Coonan stated. 

Poynton Denies Takeover

Aussie rival casino operator Star Entertainment withdrew its proposed reverse takeover of Crown Resorts last week. One offer still remains — a bid from US-based private equity firm Oaktree Capital to acquire Packer’s nearly 38 percent stake in Crown Resorts for $2.21 billion.

With Crown’s future unknown, rumblings have surfaced Down Under, although one is said to be unfounded. Ward told the Western Australia commission that the rumors of his client trying to form a consortium to buy Crown Perth have “absolutely no truth.”