Chinese online sports lottery operator 500.com is trying to reassure investors that it’s business as usual after a sharp selloff of its stock.
On Monday, 500.com shares fell more than one-quarter to close at $12.23. The shares rebounded somewhat on Tuesday, currently sitting up about 10% to $13.47, but precisely why investors fled for the exits on Monday remains a mystery.
500.com is set to report its Q3 results on Thursday but the company felt compelled to issue a statement on Tuesday “affirming normal operation of its business.” The phrase is somewhat misleading, given that the company has reported nil sports lottery revenue since March 2015, when Beijing ordered a ‘temporary’ suspension of online sales following allegations of widespread corruption by provincial lottery administrators.
500.com attempted to diversify its revenue streams through last December’s acquisition of a majority stake in online payment processor Sumpay.cn, only to unload its new acquisition this spring. 500.com reported revenue of only $200k in its Q2 report, most of which came via Sumpay.
Doubling down on its ‘we’re good’ theme, 500.com announced that it intends to resume the up to $30m share repurchase program it announced in February 2015, just as Beijing dropped the online ban hammer. The buyback comes despite 500.com acknowledging that there is “no clear indication” of when Beijing might lift the online suspension.
This spring, rumors circulated that China’s Ministry of Finance was preparing to reboot its online lottery market, but no action has been taken to date. The online suspension hasn’t dampened China’s overall lottery market, which reported sales up 6.6% year-on-year through the first nine months of 2016.
