Why is the Crown Resorts (CWN) share price sinking?

Posted: 23 July 2021 1:02 pm

Shares in the casino operator have lost a quarter of their value from a year-high hit in May.

Shares in casino giant Crown Resorts (ASX: CWN) are among the major losers on the ASX on Friday. The stock sank nearly 3% in early trading and was still down 2.4% at $10 at the time of writing.

Why is the Crown stock price slipping?

The Crown shares sell-off on Friday was triggered by an announcement by rival Star Entertainment (ASX: SGR) that it was withdrawing a $12 billion merger proposal for the casino giant.

Star cited limited engagement by Crown’s board for the proposal, made on 10 May and said the issues raised against Crown at the Victorian royal commission had also been a key factor in the decision.

“We continue to believe substantial benefits could be unlocked by a merger, however the uncertainty surrounding Crown is such that The Star is unable to continue at the present time with its Proposal,” Star said in a statement to the stock exchange.

Crown was the subject of 3 competing bids in May, but Star was seen as the most likely winner, especially after Crown’s board rejected a smaller, rival bid from US private equity group Blackstone.

Star had estimated substantial cost synergies of between $150 million and $200 million a year from the merger. It had also highlighted the potential to create significant value from a sale and leaseback of the combined property portfolio.

Growing uncertainty

The news is a further blow for Crown investors, who have heard a deluge of bad news in recent weeks from the ongoing royal commission hearings in Melbourne.

The inquiry found “misconduct or unacceptable behaviour” at various levels of the Crown Melbourne management, including revelations that the company knowingly underpaid hundreds of millions in state taxes and allegations of breaching anti-money laundering laws.

The royal commission is being urged to cancel Crown’s licence to operate the flagship Melbourne casino. Meanwhile, the beleaguered company also faces similar hearings in Western Australia to decide the fate of its Perth casino. Final findings from both are expected by the end of the year.

The dire situation has raised speculation about a potential future break-up or divestment of Crown's assets. The company’s shares have now lost nearly a quarter of their value since shares peaked at a year high in May.

Considering buying Crown shares?

If you are keen to buy shares in Crown Resorts, you can invest through an online share trading platform.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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