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Swedish Economic Crime Authority Investigates Insider TradingThe Swedish Economic Crime Authority has responded to MGM Resorts’ concerns about insider trading by investigating Stockholm Nasdaq trading price increases.
May 2022 was a time of celebration for global online gambling brand LeoVegas, announcing that MGM Resorts International would purchase the company for $607 million. The acquisition would see MGM Resorts continue its aggressive push into the digital gaming space and expose LeoVegas to the American gambling public.
When questioned about the decision to offer a 44.1% premium for the Stockholm based online casino company, MGM representatives cited several core reasons:
- Accelerated international growth potential
- Years of proven success by management in managing and growing an online casino
- Its superior technology platform
- The potential for long-term high profitability growth
A little over a month later, however, the celebrations have all but died down in the face of an investigation by the Swedish Economic Crime Authority (SECA) into possible insider trading.
Where There Is Smoke
As part of the MGM investigation into the financial affairs of LeoVegas AB, they stumbled upon some concerns regarding an unusual price hike in the company stock price on the Stockholm Nasdaq.
As with any major acquisition, there is a post-announcement price increase. In this case, it rose by 42% of the share price at the announcement. However, it was found that in the weeks preceding the offer, LeoVegas shares showed an unprecedented increase of nearly 30%, with no external factors present to justify the massive shift in value.
Such a significant increase in stock prices, followed by the announcement of the offer to purchase, led the land-based casino giant to forward its concerns to SECA. Based on their response, they also consider the situation to be, at the very least, “unusual”.
Step Up & Take Action
Rather than sit back, LeoVegas decided to take positive, proactive steps to address the issue. On June 7th, they released an official press release announcing that they will cooperate fully with the SECA in the preliminary investigation into suspected insider trading.
The company made it clear that these are only suspicions at this point:
“No employee, member in the management team or board member in the Company has been notified about any criminal suspicion.”
They stated that they would be making no further announcements until more is known about the reason for the pre-announcement stock price increase and who may have been involved in orchestrating it.
The press release advises any interested parties to direct any questions about the case to the Swedish Economic Crime Authority directly.
The Knock-On Effect
It has been postulated that the reason for the online gambling company’s swift response to the allegations is that not one, but two deals hang in the balance. Not only could a negative outcome abort the deal between MGM Resorts and LeoVegas, but also a planned New Jersey online casino.
Late last year, LeoVegas and Caesars Entertainment reached an agreement to launch a new online casino under an NJ license. Should the allegations of financial irregularities be connected to anyone within LeoVegas, the New Jersey Division of Gaming Enforcement could refuse to grant the fledgling brand a license to operate in the state.
With the stringent requirements of the company’s current licenses in Sweden, the UK, Malta and beyond, there is also the risk that these jurisdictions either restrict or void the operator’s licenses depending on the outcome of further investigations.
Expansion outside of the US is a major contributing factor in MGM Resorts’ interest in LeoVegas. Losing their Nordic and European gaming licenses would lead to the withdrawal of their offer in favour of another more fruitful acquisition opportunity.
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