Who Needs Wall Street? Gambling Companies Bet on Hong Kong Stock MarketPosted: August 25, 2014
Gambling Firms Aim to Raise Funds for Macau, Overseas Casino Operations
HONG KONG— For WSJ, Kate O’Keeffe & Yvonne Lee report: China’s international financial hub, located a quick ferry ride from the world’s casino capital, has seen a throng of gambling companies rush to its equity markets over the past year.
“The Asia gaming industry should be one of the fastest-growing sectors in the next decade.”
— CLSA analyst Aaron Fischer
Since July 2013, at least six casino and VIP gambling companies have unveiled plans to list in Hong Kong, often through so-called backdoor listings. These companies are either hoping to raise funds to expand abroad or to bolster business at home in Macau at a time when the enclave’s $45 billion gambling market is suffering its first revenue declines in five years.
Most recently, Nasdaq-listed Iao Kun Group Holdings Co. last month filed a formal listing application to go public “by introduction,” where no new funds are raised, hiring Rothschild (Hong Kong) Ltd. as its sponsor. The company is part of Macau’s junket industry, which brings high-spending gamblers from mainland China to Macau, issues them credit and collects players’ debts in exchange for commissions from casinos.
In its preliminary prospectus, Iao Kun said the planned dual listing is “likely to provide our company ready access to two different equity markets when fundraising needs arise.”
In January, listed International Entertainment Corp. 1009.HK -3.07% , which is controlled by the family of Hong Kong tycoon Cheng Yu-tung, said it intended to pay up to 7.35 billion Hong Kong dollars (US$948 million) for a 70% stake in a company linked to Suncity Group Ltd., one of Macau’s biggest junket operators. The deal could effectively give Suncity access to Hong Kong’s public market. International Entertainment initially said it would complete the deal by June 30 but later told the exchange it would need until the end of the year.
By listing in Hong Kong, junket companies are hoping for more stable—and possibly cheaper—funding. Macau’s junkets last year accounted for nearly two-thirds of the territory’s gambling revenue, but more recently they have taken a hit from China’s crackdown on corruption, which has made some wealthy customers wary of being seen betting big at the tables…(read more)