Markets reacted great to the news that MGM China Holdings and SJM Holdings have gotten license extensions. The extensions are valid for two years and will last until the start of summer of 2022. Both companies paid a single, one-time fee for this and it came with a $25 million price tag. This brings the two casinos on par with the four other main license holders.
The six gaming concessions will not all expire at the same time. All of them will be up for the 2022 review. On the other hand, analysts think that the same deadline could be further extended. On Friday, the government of Macau said that it wanted to maintain job security and social stability with this move. The officials will now move into the preparatory work. It will be necessary for the next round of public tender for the new licenses.
Naturally, the news infused a lot of energy into the markets. Hong Kong’s Stock Exchange did not allow trading of the MG and SJM shares on Friday, Melco stock jumped 4.7 percent. Galaxy Entertainment was up by 4 percent, Wynn Macau got a boost of 3.3. Percent and finally Sands China was up 2.3 percent.
License Renewal Process
In the previous months, the renewal process had the markets and the investors on edge. The same groups naturally despise any kind of uncertainty and the license issue was laden with it. Here, the main problem stems from the fact that no one knows precisely how the process of renewal will take place.
Initially, the licenses came from an opaque and complex process in 2002. However, this was only three years after Macau enclave left Portugal. Prior to that, SJM and its founder, Stanley Ho, had a virtual monopoly for almost 40 years. The period ended when the market became open for foreign casino operators. Still, SJM got an 18-year license. MGM China, as a venture between Pansy Ho and MGM Resorts International, got a sub-license.
This is a regular practice in Macau where smaller ventures regularly piggyback on major casino companies. But, here this led to the two operators being out of synch with the four other major casinos. Now, the government in Macau recognized that uncertainty is hurting everyone. This is the reason why it finally decided to synchronize both license with each other and the rest of the top-tier operators.
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