Market Event

Global Gaming Philippines (GGAM) sued BLOOM’s Enrique Razon in a federal court in New York for illegally terminating a deal for the former to operate Solaire. The lawsuit seeks to specifically confirm a $296.6 Million award from an arbitration court in Singapore.

Opinion

Recall that back in 2013, BLOOM (Target Price: PHP 8.60/share) entered into an agreement with GGAM but was terminated abruptly due to misrepresentation issues of the latter’s senior executives. With this, GGAM filed a case against BLOOM in 2013 to claim for damages due to abrupt cancellation of the contract. More recently, last February 2021, the Singapore Court of Appeal decided in favor of GGAM for the award of ~P5 Billion in damages plus 921 Million BLOOM shares valued at P10 Billion.

BLOOM’s management previously said that the award will not be enforceable until a Philippine court confirms judgment on the case. As an exercise of the impact though: a) The 921 Million shares of BLOOM were already issued and non-dilutive. However, this will still cause an overhang if GGAM will sell the shares; b) The P5.0 Billion in damages accounts for 15% of total equity and 50% of 2019 earnings (pre-COVID) of BLOOM. Recognition of impairment will be a drag to future earnings. As it is, management plan to exhaust all legal options for the case.

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