Melco Crown Entertainment, a major casino operator with holdings in Macau and throughout Asia, has announced that they plan to delist their share from the Hong Kong stock market.
According to the company, the move is being made because there is little volume of trade in their stock on the exchange, and consequentially, very little opportunity to raise additional equity there.
Since there are regulatory burdens and other costs associated with keeping a stock listed on the exchange, Melco Crown now feels that it isn’t worth the trouble to have their stock offered for trade in Hong Kong.
However, even if the delisting does go forward, investors will still be able to purchase shares of Melco Crown on New York’s NASDAQ stock market, where the company’s primary listing is located.
Macau Revenues Nosedive in Second Half of 2014
The move comes after a rough year in Macau that saw revenues for the Chinese territory’s casinos drop for the first time since foreign operators were allowed to enter the market about a decade ago.
The decline in the market was largely due to an anti-corruption campaign from the Chinese government, which severely curtailed the flow of funds from mainland China to Macau. That move battered the casinos in the second half of the year, with the industry seeing revenues decline by over 30 percent year-over-year in December.
That hit the operators hard both on their bottom lines and in the stock market, where investors fled from casino operators in the wake of the downturn. Melco Crown saw shares on the Hong Kong exchange drop about 35 percent over the course of the last year.
The delisting plan was approved unanimously by Melco Crown’s board of directors. However, it must still be approved by shareholders at a general meeting, and approvals must be granted by the Listing Committee of the Hong Kong stock exchange.
If the plan goes through, shareholders will still have the opportunity to hold onto their shares or convert them to American depository shares that can be traded on NASDAQ.
Analysts Say Delisting Not Connected to Macau Struggles
While it’s easy to connect the delisting with the troubles in the Macau market, analysts say that this is a faulty connection to make, and that the move is one that makes sense for Crown Melco based on logistics.
“I don’t think there’s anything sinister going on in the delisting of the Hong Kong entity,” said Nicholas Studholme-Wilson, a senior research analyst at Sun Hung Kai Financial. “If you’ve actually looked at the trading volume of this stock, no institution could ever deal in this counter.
It’s ridiculously illiquid and at this day, it’s so easy to deal in US stocks if you live in Hong Kong, so you might as well just have one listing.”
Still, there’s no doubt that it was a tough year on the Hong Kong exchange for companies tied heavily into the Macau market. Both Galaxy Entertainment Group and the Las Vegas Sands’ subsidiary Sands China are listed in the Hong Kong stock exchange’s Hang Seng Index, a listing of blue-chip stocks traded there.
The two companies were among the three worst performing stocks in the index over 2014, with Galaxy down 37 percent and Sands China down 40 percent. That was the opposite of the story in 2013, a year in which Melco, Galaxy and other casino stocks saw their values more than double on continued growth in Macau.