Another Star investor, who also declined to be named because they were active in the market on Tuesday, said they expected the stock would continue to fall for “a couple more days” but it was too early for directors to resign.
“You need to wait for the recommendations of the review to conclude, see what ILGA [Independent Liquor & Gaming Authority] says and if there has been malfeasance from the guys, they will step down,” he said. “But at this point, they’re steadfastly denying the majority of the allegations.
“[Although] if you compare the response of Crown versus Star, Crown came out denied, denied, denied and then that all got refuted … Star will remain in limbo for a period of time.”
Pengana chief investment officer Rhett Kessler, who does not hold stock in Star, said shareholders were right to be disappointed by the news. “It’s fraught with difficulty, no one really knows what’s going on at the moment,” he said.
“I would imagine people who are shareholders based their view to a large extent on them being the clean guys, the good guys. That’s blown up in their face.”
Mr Kessler added the revelations were also a negative for rival Crown because it would delay or destroy merger discussions between the two companies. “Star was going to bring good management, squeaky clean management to the party.”
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He said the increased scrutiny on casino compliance has led to a “rebasing” of what is considered a sustainable level of long-term gaming revenue both in Victoria and NSW, but added profits could increase once COVID-19 restrictions are lifted around the country.
“Gaming always benefits from stimulus and strong economies because it’s a direct beneficiary of higher discretionary income.”
In a detailed statement to the ASX after the market close, The Star denied that reports prepared by KPMG in 2018 were kept secret and not adequately acted on.
“Details of the review and resulting reports were shared with the AML/CTF regulator, AUSTRAC and
referred to in a statement by The Star to the Bergin Inquiry,” the statement said.
“The Star remains committed to ongoing continuous improvement of its AML compliance. To this end, The Star continues to invest in improvements in systems, capability and resources.”
Swinburne Law School senior lecturer and corporate governance expert Helen Bird said, “denial is almost a reflex defence” that could actually worsen Star’s position if the allegations are proven to be substantiated.
“As a company you’re entitled to say there’s nothing in it. That’s the approach Crown took at the start of this conundrum and it led nowhere, to a disaster, in fact, a greater public relations disaster when the full story came out.”
Ms Bird agreed it was too early for directors or executives to resign, as this might further destabilise the business, but added companies in crisis often call for an internal review to signal they’re taking the matter seriously.
“There’s always a reluctance to shoot someone in the foot before they’re certain they’re the ones who are responsible,” she said. “[But] there’s a lack of confidence in the company at this particular point.”
Ms Bird added Star’s response had created an information vacuum that would only cause further share price destruction. “If I were Star, I’d be coming out on the front foot and really attacking this. The fact they’re remaining silent opens up rumour and speculation about what’s going on.
“That vacuum is a reflection of the crisis inside the company,” she said. “But no crisis is managed by silence.”
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