Star Entertainment Group (ASX:SGR) appears bound for one of two options – “go bankrupt or be bought” – as its already low financials seep away.
The struggling casino operator took a huge hit to its share value yesterday, with the consumer company diving 33.3% after it alerted investors it had burned through as much as $100 million over the last three months to December.
Worryingly for shareholders, Star says it can last just “another six weeks.”
That short timeframe – and how resigned to it all Star’s management seems – has SGR investors panicking; not least billionaire Bruce Mathieson, the single biggest shareholder in the company. He told The Australian he can only see one of two things happening: “It either goes bankrupt, or someone buys it.”
The pub baron, who carries 9.59% of Star, has refused to offer any bailout money for the drowning operator until its looming AUSTRAC fines are finalised.
“No one will put any in until they know what those fines are going to be,” he warned.
That leaves Star staring down the barrel of a closure. It will release its half-year results sometime late in February (and what they may detail could be unflattering) but by then the company may be too far gone.
The casino operator has attempted to explain the cash burn-through by pointing to “difficult trading conditions” and a $15 million fine from the NICC in 2024.
Another huge weight on the coffers has been a provisioned $150M that Star has to hold in reserve for when the ever-looming AUSTRAC fines do come through: Should the operator be found guilty, it will have to pay some very hefty charges for breaches of counter-terrorism and anti-money laundering laws.
Costs from the transformation of the Queen’s Wharf in Brisbane have played a role too.
Following yesterday’s three-quarter dive, the company is now worth less than the value of its assets; its market cap sits at $545 million to end this week.
There is $100M waiting to be collected from a rescue loan – the Star already nabbed the first $100M from that deal in December – but it’s proved “challenging” to satisfy the conditions to draw, the company has said earlier this month.
“The group continues to explore other liquidity solutions,” it added at the time.
All this points to Mr Mathieson in all likeliness being quite right: Star Entertainment Group may well be bankrupt (or be on the bidding block) by the middle of the year.
“The financial viability candle is about to go out,” Pac Partners institutional sales team member James Nicolaou said. “In other words, borrowing a line from legendary AFL commentator Rex Hunt: ‘Yibbida yibbida, that’s all folks.'”
Star will open at 13c today after nosediving 33.3% on Thursday.
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