Why is the Tabcorp share price crashing 82%?

Tabcorp shares are deep in the red today. What's happening?

| More on:
gambling asx share price fall represented by woman in soccer had looking frustrated at tablet screen

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Tabcorp shares are crashing on Tuesday morning
  • This follows the successful demerger of its lotteries and Keno businesses
  • These businesses have been spun off into a separate listing named The Lottery Corporation

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.

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.

More on Consumer Staples & Discretionary Shares

Photo of a happy couple with their new car and car keys.
Consumer Staples & Discretionary Shares

Up 55% this year, why Macquarie believes Eagers Automotive shares can charge higher

Eagers set to capitalise as BYD’s Australian sales surge.

Read more »

Two race cars on a track at sunset.
Consumer Staples & Discretionary Shares

Down 36% in a year, this ASX 300 stock is one to watch

After a major sell-off, this high-performance cooling specialist might be gearing up for a turnaround.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »

person with large headphones looking puzzled holding their hand to their chin.
Broker Notes

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Both companies have market-beating long-term track records.

Read more »

Person taking out a slice of pizza from a pizza box.
Consumer Staples & Discretionary Shares

Why now is the time to buy the big dip on Domino's shares

Down 46% in a year, a leading expert forecasts brighter days ahead for Domino’s shares.

Read more »

Three people sit on safe cheering with pizza on table
Consumer Staples & Discretionary Shares

Food fight! Have Guzman Y Gomez shares outperformed Domino's since ASX debut?

Lets find out who’s topping the menu for investors

Read more »

Woman chooses vegetables for dinner, smiling and looking at camera.
Consumer Staples & Discretionary Shares

Here's the Coles dividend forecast from top analysts through to 2029

Can this defensive business provide pleasing payouts? Let’s take a look…

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Consumer Staples & Discretionary Shares

Guess which $14 billion ASX 200 stock is tumbling on big leadership news

The $14 billion ASX 200 stock is taking a tumble today. Here’s why.

Read more »