Crown has submitted a final plea for its Victorian casino licence ahead of judgement-day on 15 October.
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The Crown Resorts Ltd (ASX: CWN) share price is gaining today after the company made a last-ditch attempt to convince regulators to allow it to keep its Victorian casino licence.
Within its final submission to the Victorian Royal Commission into the casino operator, Crown stated the company’s licence benefited both the Victorian Government and the community.
Right now, the Crown share price is $9.21, 4.84% higher than its previous close.
Let’s take a closer look at Crown’s plea for its licence and what may happen to the Melbourne Casino Complex if the company fails to retain it.
Crown’s last resort
The Crown share price is gaining today following the company’s final submission to the Victorian Royal Commission.
The company’s latest argument is if it loses its casino licence, it would be forced to sublet the casino on Melbourne’s South Bank. According to Crown, that would make the complex less profitable and less enjoyable for visitors.
Within the submission, Crown stated:
[D]is-integration of the integrated resort would be more likely to result in reduced casino tax, significant inefficiencies, an inferior offering for customers and employees and a substantially diminished offering to tourism and the State of Victoria.
Crown currently holds a 99-year lease on the property. This means it would have to sublet the gaming segment to a competitor if it were unable to operate it.
However, Crown would still be able to operate all non-casino parts of the complex. Aside from the casino itself, the Melbourne Casino Complex houses hotels, restaurants, retail stores, residential and office accommodation, open space areas, and entertainment and recreation facilities.
While it looks like a desperate attempt to save skin, this might be good news for the Crown share price. It has reinforced that if the company loses its casino licence, it may still draw a profit from the complex. Albeit, a smaller return than its current profit.
According to a report in the Australian Financial Review last week, royal commissioner Ray Finkelstein has responded to such arguments before.
He has previously acknowledged there would be an adjustment period if another casino operator were to step in. However, the business is profitable and would continue to operate without major long-term impacts on Victoria as a whole.
Crown share price snapshot
Today’s gains aren’t enough to boost the Crown share price out of the red in 2021.
It has fallen 7% since the start of this year. It is also 1% lower than it was this time last year.
The company has a market capitalisation of around $5.9 billion, with approximately 677 million shares outstanding.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.