Home Trending Crown Plunges After China Detains High-Stakes Gambling Chief

Crown Plunges After China Detains High-Stakes Gambling Chief


Billionaire James Packers Crown Resorts Ltd. plunged in Sydney trading after Chinese authorities detained 18 of the casino companys employees including the head of international high-roller operations.

Shares in Melbourne-based Crown tumbled as much as 13 percent, leading gaming stocks across Asia lower amid concerns of a fresh Chinese crackdown on courting citizens to gamble in overseas casinos.

More than one third of Crowns revenue at its Australian resorts comes from international visitors, predominantly mainland Chinese, and the firm is building a high-roller casino resort at Barangaroo on Sydneys harbor foreshore.

The detentions suggests theres going to be some kind of crackdown, said Daniel Mueller, an analyst at Forager Funds Management Pty in Sydney. Any setback could jeopardize returns on Barangaroo.

A Chinese government campaign against corruption led to a more than two-year decline in gambling revenue in the southern Chinese territory of Macau, where Crown is exposed through a stake in casino operator Melco Crown Entertainment Ltd. The detentions late last week signal the government in Beijing is again focusing on overseas casino operators that have marketing operations in China, after arresting Korean gaming workers last year.

Crown was down 9.8 percent at A$11.69 at 12:33 p.m., while Wynn Macau Ltd. fell 3.9 percent in Hong Kong. Sydney-based Star Entertainment Group Ltd. fell 4.7 percent and in New Zealand, SkyCity Entertainment Group Ltd. fell 4.1 percent.

Gambling Crimes

Chinas foreign ministry said in a statement that Australians had been detained for suspected involvement in gambling crimes, according to the Australian Financial Review. Crown said in a statement it hadnt been told why the employees have been detained.

In June last year, Chinese officials arrested 14 South Koreans, including employees of casino operators Paradise Co. and Grand Korea Leisure Co., for allegedly marketing to Chinese gamblers, according to Yonhap News agency.

Those arrests and the detentions of the Crown staff highlight the delicate nature of working in China for an overseas casino operator.

Gray Area

Crown and other Australian casino firms pulled staff out of China over the weekend, said Jamie Soo, an analyst at Daiwa Capital Markets Hong Kong Ltd. While gambling advertising and collecting gaming debts are illegal in China, they are established practices carried out by marketing teams, he said. Macau operators are also bringing workers home, Soo said, citing ground checks by Daiwa.

Theyre all operating in a pretty gray area, said Theo Maas, a fund manager at Sydney-based Arnhem Investment Management, which oversees about A$3 billion in assets including Crown shares. You cant promote gambling in China directly, but obviously the ultimate goal is to get them to come and gamble with you. You can see where the confusion lies.

The lack of information surrounding the latest crackdown also complicates Crowns planned spin-off of its international assets, including its stake in Melco Crown. That transaction was partly designed to showcase the value of Crowns Australian operations and isolate the Macau business. Its not yet clear how a fresh clampdown in marketing activities in China might affect the valuation of Melco Crown, said Maas. 

More Complex

It makes that transaction a bit more complex, he said.

In a statement to the stock exchange on Monday, Crown said Jason OConnor, the head of its VIP International team, is among those being questioned. The company hasnt been able to speak with the staff and is working with Australias foreign ministry to contact the group, it said.

Australias foreign ministry is aware of reports of the possible detention of a number of Crown employees across China overnight on Oct. 13 to Oct. 14, including three Australians, it said in an e-mailed statement. 

Chinese authorities have three days in which to notify of the detention of Australians, according to the terms of a bilateral consular treaty, the ministry said.

Originally found athttp://www.bloomberg.com/