The Tabcorp Holdings Limited share price shocked the market significantly after starting the day over 80% lower this Tuesday morning.
In early trade, the gaming company’s shares were down a massive 82% to 93 cents.
Thankfully, this share decline is not due to anything with the company’s earnings or performance. The drop was caused by the previously announced demerger of the company’s lottery and Keno businesses into a separate listed entity – The Lottery Corporation Limited, the ticker of which is TLC.
As represented by the steep decline in the price, TLC was a majority representation of Tabcorp’s business, contributing 55% or $611 million of Tabcorp’s earnings in the last financial year.
To compensate for this, existing eligible Tabcorp shareholders have been issued shares in the Lottery Corporation.
By the time TLC lists there will be 2,225,771,703 The Lottery Corporation shares on issue. 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.
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.” Taking this into account this makes it one of the largest in the country.
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. Management still believes the business is well positioned for organic growth and potential upside from possible changes in the wagering and gaming industry.