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Crown shares are sliding again on ballooning scandal allegations

The Crown Resorts Ltd (ASX: CWN) share price is down 1.3% to $11.87 today and is now down around 6% since allegations emerged in the Nine Entertainment Fairfax Media (AXS: NEC) that the casino operator’s marketing teams in China had connections to a Melbourne brothel owner and organised criminals in China, among other accusations.

According to news reports in the Guardian a Crown ‘whistleblower’ has also alleged that high-rolling gamblers from China also obtained drugs and sex workers when in Melbourne to visit Crown’s casinos. 

Back in October 2016 a large number of Crown staff were also arrested and imprisoned in China for varying amounts of time due to allegations they were illegally marketing gambling activities or ‘junckets’ to Chinese nationals. 

While the allegations are not likely to have any material impact on Crown’s cashflows unless they put off Chinese high rollers, investors should remember casino operations remains a supposedly tightly regulated space in Australia. 

According to news reports the federal government has now ordered an Australian Commission for Law Enforcement Integrity inquiry into the allegations and the behaviour of Crown and other stakeholders.

It’s state governments that issue licences to casino operators with Crown retaining a virtual monopoly in Melbourne thanks to its Victorian state license, although it also remains dependent on the NSW state government for a license to operate a super-luxury gambling den in Sydney soon. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

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The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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