500.com shares spike on rumors of China online lottery restart

500-com-china-online-lotteryShares in Shenzhen-based online sports lottery operator 500.com went on a roller coaster ride this week on rumors of corruption investigations and the promise of a restart to China’s online lottery sales.

On Monday, 500.com shares fell nearly 10% after White Diamond Research analyst Adam Gefvert tweeted that “smart money with the inside track” was shorting 500.com stock. Gefvert added that there was “major corruption going on there, the Chinese Gov is cracking down on it.” 500.com spokesman Daniel Yan subsequently told Forbes contributor Yue Wang that Gefvert was a short-seller spreading groundless rumors.

It’s not the first time that analyst speculation has waylaid 500.com. Last May, 500.com shares tanked after analysts misinterpreted a communiqué from China’s lottery administrators that appeared to call in question 500.com’s right to operate in the country. For the record, no company has been officially licensed to offer online lottery sales in China, but 500.com and China SMG were approved to take part in an online pilot program.

Rumors can give as well as take. On Thursday, 500.com shares closed up nearly 18% to $12.29 on reports that China is preparing to restart online lottery sales following their suspension on March 1. The temporary shutdown, which was reportedly sparked by the discovery that some online operators weren’t reporting all their sales to provincial lottery administration centers, affected around 10% of 500.com’s overall revenue stream.

The technology news site of Chinese conglomerate Tencent reported that Chinese officials had reached consensus on a new online sales regime. While online sales aren’t likely to reappear for another couple months, China’s Huatai Securities believes the government will expand the number of operators approved to conduct online sales.

The news comes just one day after authorities in China’s Guangdong province announced what was referred to as the country’s biggest online gambling bust. Around 125 of the estimated 200 illegal websites operated by the ring reportedly offered unauthorized wagers on the Shishicai national lottery.