Following the revocation of One Visaya Gaming Corp's (OVGC) license by the Philippine gambling regulator, Evolution AB's [EVO] stock dropped 6% on the Nasdaq Stockholm exchange on Thursday. Following J.P. Morgan's downgrade, the stock continued to be under pressure on Friday, dealing a twin blow to the live-dealer specialist.
In June, the Swedish business established a new live-dealer studio in Asia in collaboration with OVGC, situated in Cebu City, Philippines. The partnership was hailed as a "major milestone in our long-term commitment to the region" at the time. Evolution's games are available at BigWin29, an online casino run by OVGC.
PAGCOR, the gaming regulator, informed Bloomberg on Thursday that OVGC's B2C online casino license had been withdrawn due to noncompliance. The business had failed to carry out the know-your-customer (KYC) checks that are necessary to stop money laundering and fraud.
The deadline for OVGC to shut down BigWin29 is currently October 8. The collaborative studio project hasn't been disrupted, though, because the company's B2B license hasn't been compromised.
"The B2C and B2B licenses are fully independent from each other and there is no issue with the studio,” Evolution spokesperson Adrian Westman told Bloomberg.
Nevertheless, investors punished the shares, wiping off its value of roughly SEK 9.6 billion ($880 million). This year, Evolution has decreased by about 11.35%, while the OMX Stockholm 30 index has increased by about 9.08%.
On Friday, JPMorgan dropped its price objective for Evolution from SEK 830 to SEK 675 and changed its rating from Neutral to Underweight. Analysts pointed to increased regulatory uncertainties in Asia, margin pressure, and declining growth in Europe.
The consensus is still biased in favor of buying, while other brokers are still more optimistic. However, the downgrading highlights rising investor concerns about Evolution's ability to maintain double-digit growth in more recent areas like the Philippines and India.
One of Sweden's most lucrative gaming companies, Evolution, has been under fire for its regulatory vulnerability on numerous occasions. The corporation refuted claims made by short sellers in 2021 that its games were being sold in illegal markets.
Evolution's stock plummeted back in August following a court filing that contained secretly recorded video of business executives admitting that its casino products had found their way into forbidden areas like China, Iran, and Sudan.
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