The Star Shares Plummet 31% After Regulator Fears

Star shares dropped by almost 31% following a newspaper investigation into possible money laundering at Star Entertainment's casinos.

Investors in The Star Entertainment Group Ltd have seen their investments wiped out by almost a third following reports in the Australian press. Star shares plummeted 30.97 percent over the past five days from $4.27 on October 8 to $3.21 today.

Nine’s The Age and Sydney Morning Herald published allegations into money laundering at The Star, just as it did about Crown Resorts two years ago. The Crown Resorts allegations led to several investigations, including a royal commission, and could see Crown lose all its gaming licences.

That last part is what spooked Star investors and why the Star shares dropped like a stone. Smart investors dumped Star shares like a hot potato, sparking a sell-off from other shareholders.

“Between 2014 and 2021, Star cultivated high-roller gamblers who are allegedly associated with criminal or foreign-influence operations, according to multiple casino and law-enforcement sources with knowledge of the company’s operations, including Star insiders,” wrote The Sydney Morning Herald.

The newspaper claims Star allowed an alleged Sydney cocaine importer and infamous corporate fraudster to spend millions of dollars while ignoring obvious red flags.

Star Shares Will Not Recover If Reports Are True

The Sydney Morning Herald has obtained paperwork from a KPMG audit in 2018. KPMG, a global audit firm provided reports to Star’s audit committee, which included chairman John O’Neill and CEO Matt Bekier. Those reports highlighted Star’s lack of anti-money laundering protocols, terrorism financing, or corruption at its Sydney and Queensland casinos.

The newspaper’s investigation found Star allowed Chinese high-rollers to withdraw hundreds of millions of dollars disguised as hotel expenses. They did this using special Chinese debit and credit cards. Crown Resorts did something similar and the royal commission, rightly, chastised them.

Furthermore, Mende Trajkoski turned over $175 million on Star’s pokies between 2007 and 2021. Trajkoski did this despite having no job for most of those 14 years. Casino records show Trajkoski withdrew $18 million in the past six years. He only stopped gambling when NSW police’s organised crime squad arrested Trajkoski in connection with importing three tons of cocaine into Australia.

Star issued a statement to the ASX where it called the media reports “misleading.” The statement did not prevent Star shares from tumbling. Star shares will never fully recover if the reports are true. Look at the sorry state Crown Resorts finds itself in. The same is destined for Star Entertainment.

A second statement called media reports “inaccurate.” Star claims it shared the KPMG reports with AUSTRAC. Still, Star shares are on a downward trajectory.

Smart Investors Have Not Given Up on Star

Major investors have not given up on Star shares, quite the opposite. Some are waiting in the wings hoping for more reductions before sweeping in for some value.

Steve Johnson is the chief investment officer for Forager Funds. He sold his Star holding three months ago at a profit, but is prepared to reinvest of Star shares fall below $3.

“You saw the pictures this morning of people waiting outside Star for it to reopen. The location, the machines, there are lots of reasons this wll still be a profitable business in the future, it’s just a question of how much.”

Claims Overshadow Star Sydney Re-opening

The newspaper claims overshadowed the positive news of Star Sydney re-opening. Star Sydney opened its doors as per the NSW Government’s “Reopening NSW roadmap.” The casino opened on October 11 to fully vaccinated staff and guests; Star Sydney has remained shut since June 25.

In addition to double vaccinations, Star Sydney is following other guidelines.

  • Mandatory mask-wearing
  • Indoor eating and drinking requires patrons to remain seated
  • Capacity limits of one person per four square-meters indoors and two square-meters outdoors

Star expects a capacity increase and removal of masks from December 1, 2021.