As the ASX rallied to record highs, Crown Resorts Limited (ASX: CWN) share price tumbled in the aftermath of revelations Crown is enticing unfavourable VIP gamblers to Australian shores.
Crown, which operates major casinos in Melbourne and Perth with a third set to open in Sydney in 2021. Had been trading around the $12.70 mark prior to the release of controversial allegations regarding Crowns connections to individuals involved with organised crime and the Chinese Communist Party.
Crown is accused of working with Australian border officials to fast track visas for Chinese “Junkets” with criminal ties. State governments have also been accused of overlooking questionable gamblers in favour of collecting tax revenue these actors generate from Australian casinos.
This comes following the 2016 arrest of 19 Crown employees for breaking local Chinese law banning gambling and its promotion. Worsening Crowns reputation the Victorian Commission for Gambling and Liquor Regulation, claim twice since 2015 they have imposed $150,000 fines on Crown for failing to abide by internal reporting controls.
Responding to media reports, Crown released a statement detailing “Crown does not comment on its business operations with particular individuals or businesses”. Yet Crown retains that effective internal reviews occur, that is supervised by governing financial watchdog AUSTRAC.
James Packer, who retains a 26% holding in the company despite selling $1.76 billion worth of Crown shares (19.99%) in May 2019 to Lawrence Ho director of Melco, has remained silent on the topic saying “ he had no knowledge of involvement and despite being a major shareholder, he was not a Director of Crown at the time employees were imprisoned in China and hadn’t been for many months before that”.
Crown Resorts receives over 15% of revenue from VIP gamblers, they make up a substantial category that is used to help justify casino development to state governments. This is the case at Crowns Barangaroo site intended to attract VIP gamblers. These allegations could result in a review of Crown’s gaming licences and setback the Barangaroo opening in 2021 jeopardising Crown Resorts forecast revenue over the medium term.
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