Fri, Feb 3, 3:45pm by Staff Writer
The fallout from the arrest of 18 Crown Resorts employees in China is set to continue with a class action set to be launched by shareholders of the ASX-Listed company,
The arrests in October last year have proven a major concern for Crown and its chief shareholder James Packer, with a crackdown by Chinese authorities on marketing activated by overseas casinos threatening the Chinese VIP market which Crown had pegged its expansion plans on.
Included among those arrested, 17 of whom still remain in detention in Shanghai, are three Australian executives.
The arrests precipitated a significant drop in Crown Resort’s share price, as well as a series of executive decisions which saw Crown all but exit its overseas interests and Packer return to the Crown board as a director.
Shares initially fell 14 per cent (around $1.3 billion) on news of the arrests and have never recovered to where they were in early October. Having reached a 2016 high of $13.89 on August 17, the shares are now listed at $11.15.
That drop has adversely impacted investors and law firm Maurice Blackburn is leading a class action, which will highlight the lack of visibility that shareholder had of the risks involved in the Chinese VIP market.
Maurice Blackburn Lawyers class action principal Julian Schimmel said the arrests had a significant impact on Crown’s future revenue from VIP gaming, with a significant amount of its future and existing business based on overseas ‘whales’ spending large amounts through Casinos in Melbourne and Perth as well one which is under construction in Sydney.
“The arrests in China occurred against the backdrop of Crown’s massive investment in its Sydney venture at Barangaroo, which has been spruiked as opening as a ‘VIP only’ casino and luxury resort in 2021,” Mr Schimmel said.
“Despite repeatedly making statements over a period of several years as to the significance of the Chinese VIP gaming market to the company’s strategy and earnings, Crown then tried to downplay the significance of the staff arrests claiming that the Chinese VIP market only comprises a small proportion of the company’s revenue.”
It is not known how many investors would be involved but the action will be funded by International Litigation Funding Partners, and is expected to involve institutional investors who were burned by the initial share price fall.
Crown said in October that approximately 12 per cent of its revenues, or around $400 million, was dependant on the Chinese VIP market.
With the trial of the 18 staff unlikely to begin until mid-year, Crown’s marketing activities into key markets like China have ground to a halt.
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