Shares of 500.com Limited WBAI, a leading online sports lottery service provider in China, did not witness any movement on Apr 6 as a result of voluntary and temporary suspension of online lottery sales by the company.
500.com’s shares closed at $12.29, same as the last trading day of Apr 2.
Why the Suspension?
On Apr 3, eight competent government authorities in China made a public announcement and imposed restrictions on online lottery sales in the nation. Per the announcement, all bodies that provide unauthorized online lottery sales services, directly or indirectly, will have to immediately stop such services while all provincial governmental authorities of finance, civil affairs and sports have to investigate unauthorized online lottery sales in their respective jurisdictions according to relevant laws and regulations.
Secondly, local government authorities of public security and industry and commerce have to investigate any sales of illegal lottery products within their respective jurisdictions and report any criminal activities to law enforcement for prosecution. Also, lottery issuance authorities that plan to sell lottery products online need to obtain permission from concerned authorities in order to submit an application for written approval by the Ministry of Finance or any entity that provides online lottery sales services.
Response to the Announcement
In response to the announcement, 500.com Limited stated that it was one of the two entities that got approval from the Ministry of Finance in 2012 to provide online lottery sales services on behalf of the China Sports Lottery Administration Center.
Nevertheless, it believes that the current public announcement is a fruitful step by the authorities to create a healthy lottery market in China. Given the objective, 500.com Limited decided to voluntarily and temporarily suspend all of its online lottery sales services beginning Apr 4, 2015. The company does not expect to generate any revenues during the temporary suspension period. However, it stated that it will continue to work with China Sports Lottery Administration Center for the development of the pilot program for online sales of sports lottery – for which it received approval in 2012.
In late Feb 2015 also, the company had announced some sales suspensions in response to government notices on issues related to self-inspection and self-remedy of unauthorized online lottery sales issued on Jan 15, 2015.
Gaming Industry in Trouble?
This is not the first time that the government of China is trying to implement restrictions on the gaming industry. In May last year, it began an anti-graft corruption campaign to restrict illegal money transfers from mainland China to Macau casinos. Since then, leading casino companies like Wynn Resorts Ltd. WYNN, Las Vegas Sands Corp. LVS, MGM Resorts International MGM and Melco Crown Entertainment Limited that have their operations in Macau have been experiencing sluggish results.
We need to wait and see how this restriction in the lottery market impacts 500.com Limited. The company presently has a Zacks Rank #4 (Sell).
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