It may surprise many, but this hasn't been quite as bad a year for Crown Resorts Ltd (ASX: CWN) given the numerous problems dogging the company. The question is whether the worse is behind the casino operator and if the stock can stage a rebound in 2018.
While its share price is off 1.8% to $12.11 on Monday on news that a class action has been filed against the company, the stock is still managing to hold on to a circa 4.6% gain this calendar year, which is about a percentage point behind the S&P/ASX 200 (Index:^AXJO) (ASX:XJO).
That is not a bad performance given Crown has been afflicted by the arrest of employees in China, divestment of poorly performing assets in Macau and allegations that it has been tampering with poker machines at its Melbourne facility.
No matter how you look at it, there are too many governance monkeys on Crown's back and that makes this stock too hard to bet on for 2018, in my opinion.
What's more, I don't think the class action launched by Maurice Blackburn that was announced today will be the last. This class action was filed on behalf of shareholders that had suffered losses from the arrest of Crown's employees earlier this year.
I believe another class action is likely to come from the poker machine tampering issue, especially since a fourth Crown employee has come forward on the ABC to support those allegations tabled by Member of Parliament Andrew Wilkie.
Investors should be alert to these issues clouding Crown because research done by various experts has found a correlation between corporate governance and share price performance.
We have seen how questions of corporate governance can drag on a stock for months and I fear this is what Crown shareholders will be faced with in 2018.
You only need to think about the scandals plaguing Commonwealth Bank of Australia (ASX: CBA) and the humbling experience of Sirtex Medical Limited (ASX: SRX) to appreciate the downside risks.
Both these companies are also facing possible class action.
Other notable ASX companies facing possible class actions include law firms (how ironic!) Slater & Gordon Limited (ASX: SGH) and Shine Corporate Ltd (ASX: SHJ), supermarket giant Woolworths Limited (ASX: WOW) and milk formula manufacturer Bellamy's Australia Ltd (ASX: BAL).
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