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Acquisition of MGM China shares by “insider” seen as vote of confidence

Investor portal Simply Wall St has described the recent acquisition of HK$128 million (US$16.5 million) worth of shares in MGM China Ltd by long-time shareholder Sean Ma as a vote of confidence in the long-term value of the company.

Ma, via his Hong Kong-based investment management firm Snow Lake Capital Ltd, purchased 15.43 million shares via two separate transactions on 17 September and 30 October at an average price of HK$10.13 – only slightly below MGM China’s 30 October market price of HK$10.22 and right on the price HK$10.12 at market close on Friday. The transactions increased his stake from 4.94% to 6.04%.

According to Simply Wall St, MGM China shareholders should be pleased to see an “insider” like Ma investing further in the company and at close to current prices.

“Therecent purchase by Sean Ma was the biggest purchase of MGM China Holdings shares made by an insider individual in the last 12 months, according to our records,” the portal stated, which describes a company insider as any individuals who reports their transactions to the relevant regulatory body.

“So it’s clear an insider wanted to buy, at around the current price. That means they have been optimistic about the company in the past.

“It’s certainly positive to see the recent insider purchase. We also take confidence from the longer-term picture of insider transactions. But we don’t feel the same about the fact the company is making losses. Once you factor in the high insider ownership, it certainly seems like insiders are positive about MGM China Holdings.”

Simply Wall St noted that MGM China insiders own around 27% of the company, worth around HK$10 billion.

“Many investors like to check how much of a company is owned by insiders,” it said. “This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.”

MGM China recently reported MGM China has reported an Adjusted EBITDA loss of HK$730.6 million (US$94.2 million) for the three months to 30 September 2020, hindered by the ongoing impact of COVID-19.

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