$500m wiped from The Star as investors revolt after dismal result
Investors have wiped more than $500 million off the value of the Star Entertainment Group in a brutal trading session, after the company’s shares emerged from a near month-long suspension and new boss Steve McCann this week warned it faced more financial and regulatory hurdles.
Shares in the casino operator plummeted 44 per cent to 25¢ on Friday, the first time that shares in the Star have traded on the ASX since late August, when the company sought a trading halt.
The Star’s CEO Steven McCann.Credit: Dominic Lorrimer
In early September, the ASX suspended Star shares after it failed to release its full-year results within the required period, and this Thursday the company finally reported it had made a full-year loss of $1.7 billion.
Friday’s plunge in Star’s share price means the company’s market value has tumbled from about $1.3 billion to less than $750 million.
The share price collapse is the result of various regulatory and financial shortcomings since it was disgraced in 2022 for extensive anti-money laundering and counterterrorism failings.
McCann fronted investors on Thursday after spending most of September convincing the company’s lenders to issue a new $200 million loan. Before securing the new loan, The Star had just $130 million in cash and was on the brink of a liquidity crisis. But it’s far from out of the woods.
The company told investors it still faced “significant near-term liquidity requirements”. This is partly because the cost of its operations has skyrocketed while the number of customers visiting its three precincts has fallen.
It’s also at the beginning of a staggered transition to outlaw cash transactions at its casinos and only accept carded play. Revenue has fallen by 10 per cent since Star Sydney completed the first phase and moved to carded play in its VIP gaming floors last month. It will have to transition its entire operations to carded by next October, while its pubs and clubs rivals will still be able to accept cash.
McCann has committed to cutting $100 million in costs over the next six months, including 350 job losses and the potential sale of some assets, such as its suite of hotels in Sydney, Brisbane and the Gold Coast.
The group is also facing regulatory challenges. On Friday, it is due to respond to a show cause notice from the NSW regulator as it decides whether Star Sydney should be able to keep operating its casino.
The Star is also bracing for a potential multimillion-dollar penalty from the financial crimes regulator, Austrac, pending the results of a three-week hearing next June.
The company recently conceded it did not pay enough tax in NSW following a review by the state’s liquor and gaming authority and awaits another potential penalty for that.
It also faces four class actions in the Supreme Court of Victoria on behalf of shareholders who allege The Star behaved in a misleading or deceptive way and breached its continuous disclosure obligations between 2016 and 2022 in relation to its extensive anti-money laundering and counterterrorism failings.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.