Why are Star Entertainment shares surging 23% on Monday?

This struggling casino operator is catching the eye of investors today. Let's find out what is happening.

| More on:
A group of people cheer at a blackjack table in a casino

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

Star Entertainment Group Ltd (ASX: SGR) shares are avoiding the market weakness and roaring higher for once on Monday.

In early trade, the embattled casino and resorts operator's shares were up as much as 23% to 13.5 cents.

Its shares have since pulled back a touch but remain up 15% to 12.7 cents at the time writing.

Why are Star Entertainment shares rocketing?

As a reminder, the company's shares have crashed deep into the red over the past 12 months amid concerns that it could be on the verge on going bust.

As we covered here last month, Star Entertainment warned of this with its second quarter update. It said:

Given the reduction in the Group's available cash as at 31 December 2024 and the Group's ongoing financial and liquidity challenges, the Company and its directors continue to seek external advice in respect of their duties, including the applicability of, and the ongoing reliance on, the safe harbour provisions under the Corporations Act.

As noted above, the Group continues to explore other possible liquidity solutions. While discussions continue with respect to a range of different solutions, there is no certainty that any of these negotiations will result in one or more definitive arrangements that might materially increase the Group's liquidity position. In the absence of one or more of those arrangements, there remains material uncertainty as to the Group's ability to continue as a going concern.

In light of this, news that the company could soon get a major cash injection is giving Star Entertainment shares a boost today.

What's happening?

This morning, Star Entertainment advised that it has received several confidential, indicative and non-binding proposals from Chow Tai Fook Enterprises Limited (CTFE) and Far East Consortium International Limited (FEC) seeking to acquire its 50% interest in Destination Brisbane Joint Venture (DBC), along with other assets.

DBC includes its new Queen's Wharf complex in Brisbane.

However, the Star board has assessed each of the CTFE and FEC Proposals received to date, and after careful consideration concluded that none of the proposals have provided sufficient value.

The good news is that talks with CTFE and FEC continue and the company is looking to ascertain whether a sale of the 50% interest in DBC can be negotiated on satisfactory terms. But it warns that there is no certainty that any transaction will be concluded.

Finally, in other news, the company is in court today battling legal action from ASIC. The corporate regulator has pulled in former Star executives alleging breaches of directors' duties.

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

A gambler at a casino bets a pile of chips on one number
Consumer Staples & Discretionary Shares

Own Star Entertainment shares? 12 things to weigh up before voting on takeover

Let's take a look.

Read more »

A car dealer stands amid a selection of cars parked in a showroom.
Broker Notes

Up 77% in a year, guess how much more upside Macquarie tips for Eagers Automotive shares

Macquarie released its latest analysis on Eagers Automotive fast rising shares this morning.

Read more »

A farmer looks backwards towards his crops.
Consumer Staples & Discretionary Shares

Elders shares result: The good, the not so good and the interesting, according to Macquarie

It was a mixed half for the agribusiness company. Here's Macquarie's take.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Consumer Staples & Discretionary Shares

Takeover terms found unfair to Star Entertainment shares investors but the 'only lifeline' left

Star has released the independent expert's report into the Bally's takeover deal and set a date for the vote.

Read more »

A warehouse worker is standing next to a shelf and using a digital tablet.
Consumer Staples & Discretionary Shares

Wesfarmers share price dips amid strategy day for investors

What's ahead for this diversified conglomerate?

Read more »

A man looks a little perplexed as he holds his hand to his head as if thinking about something as he stands in the aisle of a supermarket.
Consumer Staples & Discretionary Shares

Should I buy Woolworths shares today?

Woolworths shares have gained far less than Coles shares over the past year. Is that about to change?

Read more »

A woman sits at her home computer with baby on her lap, and the winning ticket in her hand.
Consumer Staples & Discretionary Shares

Which 'enduring high-quality business' has become a forgotten ASX 200 stock?

Fundie says this ASX 200 consumer discretionary stock has been flying under investors' radar.

Read more »

A young man sitting at an outside table uses a card to pay for his online shopping.
Consumer Staples & Discretionary Shares

Why is the Kogan share price crashing 12%?

Profits are down at this ecommerce company during the second half.

Read more »