By Kate O'Keeffe
Dual-listed casino operator Melco Crown Entertainment Ltd.
Friday applied to delist from the Hong Kong Stock Exchange just
three years after listing its shares in the Chinese financial hub,
citing limited fundraising opportunities and onerous compliance
obligations and costs.
The gambling company, which operates casinos in Macau and a
newly opened property in the Philippine capital of Manila, said it
would maintain its primary listing of American Depositary Shares on
the Nasdaq, where Melco Crown has been listed since December
2006.
The news comes after a disastrous year for casino stocks caused
by a sharp downturn in Macau, the world's largest gambling market,
as China's corruption crackdown scared off highrollers. Shares of
Macau's six licensed casino operators fell an average 40% in 2014
as Macau experienced its first recorded annual decline in gambling
revenue--a 2.6% drop after a decade of booming growth.
Las Vegas Sands Corp. unit Sands China Ltd. and Galaxy
Entertainment Group Ltd.--the only two casino stocks that are part
of Hong Kong's blue-chip Hang Seng Index--were two of the three
worst-performing stocks on the index last year, weighing down the
entire market. Both listed Melco Crown entities fell about 35% in
2014.
By contrast, in 2013, when Macau gambling revenue rose 19%, the
share prices of Nasdaq-listed Melco Crown, as well as Hong
Kong-listed MGM China Holdings Ltd. and Galaxy, all more than
doubled.
Melco Crown--which has as its co-chairmen Lawrence Ho, son of
Macau gambling mogul Stanley Ho, and James Packer, son of the late
Australian casino-and-media magnate Kerry Packer--said in a
statement to the exchange late Friday that it wanted to leave the
market because "appropriate opportunities to raise additional
equity in Hong Kong have not arisen, and the volume of trading in
the shares on the stock exchange remains very limited."
It added that "maintaining the listing of the shares on the
stock exchange requires additional ongoing regulatory compliance
obligations and such requirements involve significant additional
costs and administrative burden." A spokeswoman for Melco Crown
declined to comment beyond the announcement.
CLSA analyst Aaron Fischer told The Wall Street Journal that the
delisting plan made business sense. "I don't think there is any
point having an extra listing if that stock doesn't trade due to
limited investor demand, and therefore it's not worth incurring the
costs of the listing," he said, adding that he didn't believe there
were any other reasons behind the company's decision to leave the
Hong Kong market.
According to data on exchange operator Hong Kong Exchanges &
Clearing Ltd.'s website, the average daily trading volume of the
Hong Kong-listed Melco Crown for the past three months was 34,000.
On Nasdaq, Melco Crown's average daily trading volume over the past
50 days was 3.88 million, according to the U.S. exchange's
website.
A spokeswoman for HKEx said that while she wouldn't comment on
individual companies' business decisions, "we trust our market is
attractive to issuers due to its liquidity and competitive in terms
of compliance cost." She said that the total funds raised from new
issues and issues in Hong Kong's secondary market reached $935.8
billion Hong Kong dollars (US$120.6 billion) in 2014, a record
high. In 2014, Hong Kong also set a record with 96 main board
listings, she said.
Melco Crown said in its statement that shareholders would have
two options after the proposed delisting: continuing to hold the
delisted shares or holding their interest in the form of the
Nasdaq-listed ADS. The company said the timing of the proposed
listing, which would require the approval of shareholders and the
Hong Kong Stock Exchange, was unclear.
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