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Will the mass slaughter of racehorses trample Tabcorp’s share price?

Images of the killing and abuse of racehorses on an industrial scale around the country will make many sick to their stomach, and the impact may be felt on the ASX this morning.

A report by the ABC exposed the dirty underside of the animal racing industry and claims that as many as 4,000 thoroughbred horses are sent to abattoirs and knackeries each year.

Even those not directly implicated in the immoral, if not illegal, practices could feel the fallout of public anger. It will be interesting to see what impact that might have on the Tabcorp Holdings Limited (ASX: TAH) share price.

Melbourne Cup runneth empty?

Horse racing is a big money spinner for the wagering and lotteries group, and the risk of many boycotting next month’s Melbourne Cup will put further strain on Tabcorp’s bottom line.

The revelations by the ABC were so shocking it left me shaken and prompted some punters to cancel their TAB accounts.

The racing industry was already tainted by the greyhound racing scandal but the cruel treatment of thoroughbreds takes this to a whole new level.

It’s really fortuitous that Tabcorp merged with national lottery operator Tatts in December 2017 as the lottery division is proving to be the saviour for the group.

Even before the scandal, the wagering division was proving to be a losing bet for investors as online competitors have aggressively moved in to steal market share, while earnings from lotteries went gangbusters.

Traditional gambling stocks under pressure

The latest racehorse controversy will only add more pressure to the already weak division for Tabcorp and comes at a time when the gambling industry is under a cloud.

I am referring to separate news reports of alleged money laundering activities at casinos run by Crown Resorts Ltd (ASX: CWN).

The silver lining is that the racehorse saga will distract from Crown’s management for a while and that won’t be such a bad thing for shareholders who’ve seen the CWN share price tumble around 8% over the past year when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is up nearly 13%.

While the TAH share price is trading close to its 52-week highs as it closed at $4.90 per share on Thursday, the stock is also lagging the broader market with its less than 2% gain in the last 12 months.

In another sign that online businesses are disrupting the incumbents in the industry, the Jumbo Interactive Ltd (ASX: JIN) share price surged 260% over the same time period.

I know who’s on the winning side of that bet.

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Brendon Lau has no position in any of the stocks mentioned. Connect with him on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Jumbo Interactive 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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