The Tabcorp Holdings Limited (ASX: TAH) share price has crashed significantly lower on Tuesday morning.
In early trade, the gaming company’s shares are down a massive 82% to 93 cents.
Why is the Tabcorp share price crashing?
The good news for shareholders is that the weakness in the Tabcorp share price has nothing to do with the company’s performance or a broker downgrade.
Today’s decline has been driven by the demerger of its lottery and Keno businesses into a separate listed entity – The Lottery Corporation Limited (ASX: TLC).
This was a major part of the Tabcorp business, contributing 55% or $611 million of Tabcorp’s EBITDA in FY 2021. So, with this EBITDA removed from the Tabcorp business, its shares have fallen to reflect this.
In exchange, existing eligible shareholders have been issued shares in the Lottery Corporation.
Management notes that The Lottery Corporation is an omni-channel business with a portfolio of high profile, recognised brands and games, strong digital growth and a retail footprint across ~7,000 retail outlets/venues. This makes it one of the largest in the country.
At listing, there will be 2,225,771,703 The Lottery Corporation shares on issue. So with the company’s shares expected to open around the $5.00 mark, this will value the spin off at ~$11 billion. This compares to a ~$12 billion valuation for pre-demerger Tabcorp.
What’s left of Tabcorp?
Tabcorp has been left with its wager and media and gaming services businesses, which generated revenue of $2,493 million and EBITDA of $464 million in FY 2021.
It will be a leader in omni-channel wagering, racing and sports broadcasting, and gaming services solutions. Management believes the business is well positioned for organic growth and potential upside from possible changes in the wagering and gaming industry.
The post Why is the Tabcorp share price crashing 82%? appeared first on The Motley Fool Australia.
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More reading
- 5 things to watch on the ASX 200 on Tuesday
- Here are the 3 most traded ASX 200 shares on Monday
- Here’s why the Tabcorp share price is lifting on Wednesday
- Tabcorp share price rangebound following lotto demerger vote
- Here are the 3 most heavily traded ASX 200 shares on Tuesday
Motley Fool contributor James Mickleboro 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 Scott Phillips.
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