Star Entertainment Group Ltd (ASX: SGR) shares are crashing on Thursday morning.
At the time of writing, the struggling casino and resorts operator's shares are down 25% to a record low of 14.5 cents.
This means that the company's shares have now lost 74% of their value since this time last year when they were fetching 56 cents.
Things are even worse on a five-year timeframe, with Star shares down a whopping 96% from $3.93.
But what is causing investors to hit the sell button today? Let's find out.
Why are Star shares falling again?
Investors have been heading to the exits today after the company released an update on its cash and liquidity position.
As you might have guessed from its share price reaction, things are not looking good for Star right now.
According to the release, its unaudited accounts show that it expects to report an available cash balance of $79 million when it releases its half year results at the end of February.
While this might seem like a decent amount of money for a company to be sitting on, it isn't when you are burning through cash like kindling.
Star's available cash balance fell $70 million during the three months from $149 million at the end of September.
But that includes money that was drawn down from tranches one of a new debt facility. The release reveals that on 3 December the company took advantage of the debt facility to boost its cash balance.
As a result, adjusting for the impact of the draw down, management estimates that there has been a reduction in available cash over the three-month period of approximately $107 million.
With only $79 million left in the bank, the company cannot (literally) afford another quarter of this level of cash burn.
When explaining the cash burn, the company blamed difficult trading conditions, fees and fines, and essential capital expenditure. It said:
The reduction in Available Cash reflects the continued difficult trading conditions highlighted at the Group's Annual General Meeting on 28 November 2024, essential capital expenditure, significant items including upfront fees relating to the establishment of the New Facility, the first $5 million instalment of the $15 million fine imposed by the NSW Independent Casino Commission on 17 October 2024 following its consideration of the Bell Two Report, significant legal and consulting fees, ongoing transformation and remediation activities, and joint venture contributions.
What's next?
Star revealed that it continues to work towards the fulfilment of conditions precedent that must be met in order to draw down an additional $100 million under tranche two of the new facility.
However, it notes that "a number of these conditions remain challenging to meet given the Group's current circumstances."
As result, it is also continuing to explore other liquidity solutions.
