Casino Stocks Crash On Chinese Crackdown
Casino stocks were hit hard in Thursday’s pre-market session following a Bloomberg report on regulation in Macau.
According to Bloomberg, Chinese police seized China UnionPay cards that were being illegally used at casinos in Macau. In addition, the devices will be banned from casinos in the region.
The problem with this payment method is that many transactions are being concealed from the government to hide gambling activity by sneaking currency from mainland China into Macau. Bloomberg explains that this is done by lending items to a pawn shop in return for Macau’s currency. The city is somewhat autonomous and has its own currency.
The South China Morning Post says the hidden amount of gaming revenue in 2013 may have been as high as $90 billion; only $45 billion was reported, showing the magnitude of the problem.
Macau is big money for casinos. Las Vegas Sand’s growth is not driven primarily by the region, which contributed $630 million of $1,166 million, or 54 percent, of adjusted EBITDA for the most recent quarter.
CEO Sheldon Adelson was quoted saying that the people of Macau “have been wanting to challenge luck for 3,000 years and nothing, through thick or thin, tall or short, slim or fat, nothing has stopped them, and I don't think anything will."
Shares of these casino stocks have received a small bounceback in Thursday's trading, but are still depressed from Wednesday's close.
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