Star Entertainment Investors File Class Action Lawsuit

Star Entertainment has had better months. It has had better years. The current inquiry by the NSW Independent Liquor & Gaming Authority is revealing and sometimes jaw-dropping. But for Star and its employees, it has been painful, leaving many employees – and even executives – to wonder what may be next for the company.

Now, Star Entertainment faces a class action lawsuit…from its own investors.

Investors Claim Deception

The Star Entertainment Group itself announced the lawsuit. It acknowledged that Slater and Gordon (based in Melbourne) served it with a statement of claim for a securities class action lawsuit. The case would head to the Supreme Court of Victoria.

Star announced that the claim “alleges The Star failed to comply with continuous disclosure requirements and engaged in misleading or deceptive conduct between 29 March 2016 and 16 March 2022…” This conduct took the form of disclosures and non-disclosures. And it pertained to everything from the company’s basic systems and controls and through its operations.

The lawsuit even cited the current NSW Independent Liquor & Gaming Authority inquiry and the media reporting that spurred it.

There was only one further comment from Star: “The Star intends to defend the proceedings.”

Class Action Representation

Slater and Gordon issued its own media release. In it, the law firm revealed that the statement of claim is 108 pages in length.

The basic assertion is that Star promoted itself as an “ethical and responsible casino operator that complied with its legal and regulatory obligations.” However, the information revealed in the NSW inquiry thus far – with more revealed each day – has shown that to be untrue.

Class Actions Senior Associate Ben Zocco said as much. “For the last six years, Star has held itself out to be a model casino operator that took its obligations seriously and followed not only the letter of the law but the spirit of the law. Star insisted that it took compliance seriously and ran its business ethically, honestly and with integrity. Our investigations to date, in addition to the extraordinary evidence revealed so far in the Bell Inquiry, suggests that they did everything but.”

Zocco went on to explain that investors bought shares based on the company’s statements and self-promoted reputation. There had been no reason to think otherwise. All legal and financial statements attested to its stringent adherence to regulations.

Stock Prices Crash

The Star Entertainment shares averaged $5.68 per share on March 1, 2016. The lawsuit starts with purchases beginning in that month. In December 2017, shares hit a decade-long high $6.08. The decline began there. By July 2019, shares had dipped to $4.14.

The pandemic sent stock prices down to $2.15 per share, a decade-long low point.

A slow but sure post-Covid surge brought prices back up over $4. It hit $4.47 in September 2021. But it went downhill again from there. The public notices and scandals prompted another downfall. About the time that the public inquiry began, stocks dropped from $3.20 each to $3.10. Despite some roller coaster action in the past year, the trajectory has been poignantly downward.

The overall decline represents billions of dollars.

Lynch Started It

According to the representing law firm, David Lynch is the lead plaintiff. He initiated the action because of the extreme share price downfall but moreover because he felt that the company misled him and other shareholders.

“As an investor,” he said, “I expect that licensed operators that are publicly listed will operate in accordance with the law, and that there are appropriate checks and balances to ensure they do so. I am dismayed by the apparent scale of Star’s misconduct that is not being revealed in the public hearings.”

He took particular issue with Star CEO and Managing Director Mathias Bekier. He recently resigned amidst accusations at the aforementioned public hearings. But back in 2019, he addressed the Crown scandal and assured the public that Star was different. He stated that Star was doing its utmost “to run a clean and legal business.” He added, I feel that what we do is both lawful and is executed in a way that should give us and our investors confidence that we are doing the right thing.”

All along, Lynch and other investors claim, Bekier was aware that the statement he made was untrue.

Outlook Not Positive

The class action lawsuit may be a way for investors to get out in front of any further downfall of Star Entertainment. Analysts do not see a positive outlook for the company. This is particularly true in light of the Crown debacle that Star executives watched but believed they wouldn’t face the same scrutiny.

According to the Centre for Public Integrity Director Geoffrey Watson, the hearings paint a larger picture. It presented “extremely powerful evidence of organized facilitation of prohibited activities.”

Analysts like Jefferies Financial Group told Bloomberg that there is a “very real possibility” that the Star Sydney could lose its gaming license.

Current economic conditions have recently put a spotlight on various countries and their dependence on China. Some say the Crown and Star scandals shine a specific light on that. Both casino companies built their Australian empires around a dependence on Asian business, specifically Chinese business. Gambling policy reform specialist Charles Livingstone noted that this makes the two entities’ revenue sources unsustainable. “The real problem is casinos became a law unto themselves,” he said.

Anyone Can Join

Anyone who purchased shares of Star Entertainment between 29 March 2016 and 16 March 2022 is automatically a party to the class action lawsuit. However, if anyone wants to withdraw from the lawsuit, there will be an opportunity to do so in the near future.

The law firm will contact all shareholders at a later date to confirm participation in the case. If anyone is unsure if they are a part of the lawsuit, they can submit a form online for updates.

It will not cost anything for participants in the class action.

Slater and Gordon will calculate their own legal costs as a percentage of the amount of any damages award or settlement. The Court would approve those legal costs.