The Crown Resorts Ltd (ASX: CWN) share price is rising over 4% higher on Victorian Royal Commission update.
Royal Commission on Crown
Crown has been under the microscope since February 2021 when the Victorian Government launched a Royal Commission into Crown Melbourne’s suitability to hold its Victorian casino licence.
The Royal Commission is required to present its findings and recommendations by 15 October 2021
.
Crown’s latest submissions
On Wednesday Crown updated the market with its latest submissions in the Royal Commission process.
Crown said that on 3 August 2021 the Commissioner made enquires as to the areas which may be required to be sub-let if Crown Melbourne’s licence is cancelled or surrendered.
In Crown’s submission addressing this issue, it said: “In the event that the Melbourne Casino licence is cancelled, Crown accepts that the State may require it to grant a sub-lease at market rent.”
Crown said that the area to be sub-leased is limited to casino areas. It does not apply to the other parts of the Melbourne casino complex such as hotels, restaurant, retail, entertainment and carpark facilities.
Crown argues it would be a bad idea to sub-lease
As part of the submission on 9 August 2021, Crown argued that if it was required to sub-lease its casino it would not be in the public interest and could have the “very real potential” to trigger a default under Crown’s debt facilities.
Crown said that the Victorian Government would lose the benefits associated with the integration of the casino and resort. Some of the risks it outlined were reduced casino tax, less jobs and a reduction in tourism.
Crown said that it is not aware of any integrated resorts in the world that have separated its casino. Crown stated that it may not be possible to practically separate the casino operations.
Commissioner disagrees
According to the Australian Financial Review, Commissioner Finkelstein has already rejected Crown’s claims that Victoria would be so drastically affected.
The Commissioner recognised that there would be “dislocation” but iterated that no matter who runs it, Victoria’s sole casino is a “highly profitable” business venture and will continue to need employees and pay tax.
Final thoughts on the Crown share price
The Crown share price is up almost 5% at the time of writing. Sometimes it’s hard to dissect exactly why the market reacts the way it does.
Perhaps investors think that subleasing Crown’s casino operations is a reasonable solution.
It might be that investors can see the end of the Royal Commission tunnel and may feel as though the uncertainty is lifting. It’s a well known trope that the market hates uncertainty.
The Royal Commission result will be released by 15 October 2021 and I’m waiting with interest to see what happens. However, I’m not a buyer of Crown, I think there are better opportunities out there.
