By Sean Geary
Sands China (SCHYY.PK), a subsidiary of American-based gambling conglomerate Las Vegas Sands (LVS) dropped in Hong Kong trading after news broke that the Macanese government would start an investigation into a data transfer from the United States to Macao.
Sands China's equity price, as well as that of parent company Las Vegas Sands, has been under pressure in recent weeks due to both uncertainty over the global economy, as well as legal issues in the United States.
Former CEO of Sands China Steve Jacobs was fired in 2010; the cause of his termination remains contested. Jacobs has filed a lawsuit in the United States claiming that he was let go because of his refusal to engage in certain practices that he felt would eventually lead to legal problems for the company -- namely, fostering prostitution and having dealings with people who have known links to organized crime. His accusations have drawn the attention of the U.S. Justice Department, which is investigating the legality of certain company practices under the Foreign Corrupt Practices Act.
Las Vegas Sands has claimed the documents in question are located in Macao and that removing said documents would be impossible.
Now, the government of Macao is looking into exactly how these documents arrived on its shores, as it has come to the attention of authorities that these papers were transferred by mistake.
As a result of this legal mess, Sands China dropped more than 3% in Hong Kong trading today.
While legal problems are always cause for concern with equity investors, the potential ramifications for the company itself are relatively small. While Adelson personally may be culpable, it remains highly unlikely any sanctions against the company would be large enough to have a substantial effect on its equity price. In fact, given that share prices of gaming firms with Macao exposure are so heavily discounted at this point, there may be a buying opportunity in the midst of these legal concerns.
Disclosure: Author is long LVS.