JPMorgan Chase & Co. has acquired a substantial equity stake in the financially troubled Australian casino operator Star Entertainment. According to a recent filing with Australian securities regulators, the New York-based banking giant purchased 5.47% of the gaming company’s voting equity. This significant move comes about a month after Star was delisted from the Australian Stock Exchange (ASX) due to its failure to release financial results as scheduled. Star Entertainment stands as the largest publicly traded casino operator in Australia.
The casino operator has been grappling with escalating regulatory challenges, including scrutiny over its suitability to hold gaming licenses. This has led to a dramatic decline in its stock value, with shares having plummeted approximately 50% year-to-date after losing two-thirds of their value last year, and an additional 52% in 2022.
JPMorgan has yet to disclose its intentions for the investment in Star, but it is evident that the gaming company has pressing financing needs that the bank and other investors might help address. For instance, Star recently inaugurated the multi-billion dollar Queen’s Wharf project in Queensland and is in immediate need of cash – a request that the New South Wales government has hesitated to fulfill.
The investment from JPMorgan marks the latest episode in the ongoing narrative of Star’s struggles. Last month, Star indicated to its investors that it might sell various assets in an attempt to raise necessary funds to sustain operations. It remains unclear if the bank or other stakeholders are advocating for these asset sales.
Star is also dealing with the fallout from an extensive anti-money laundering investigation, which puts it at risk of losing control over its flagship venue, The Star Sydney, currently managed by the Australian government since 2022. The company’s other venues, The Star Brisbane and The Star Gold Coast, are also under government administration.
Earlier this year, Star informed regulators that it considered itself still unfit to manage the Sydney property and expressed an interest in extending the government’s oversight of the integrated resort.
In May, media reports surfaced suggesting that Hard Rock International, the gaming subsidiary of Florida’s Seminole Tribe, was contemplating an acquisition of Star. However, Hard Rock quickly denied these rumors, and there has been no further talk of a takeover since then.
While JPMorgan’s precise plans for its investment in Star remain unknown, there is speculation about whether the bank aims to act as an activist investor. Activist shareholders typically push for significant changes within the companies they invest in, including potential asset divestments or outright sales. Star’s current vulnerabilities make it an enticing target for potential suitors willing to collaborate with the Australian government to resolve its regulatory issues.
Furthermore, it is possible that JPMorgan could partner with another Star investor to provide much-needed financing to the gaming company. Earlier this year, the Australian asset manager Perpetual also took a stake in Star, though there are currently no indications of any discussions between Chase and Perpetual.