Stars Group shares surge on legal victory at the Kentucky Court of Appeals

TORONTO – Shares of The Stars Group Inc. surged in midday trading after it announced that the Kentucky Court of Appeals has reversed a US$870-million lower court ruling against the online gaming company.

It says Kentucky residents had sued PokerStars in 2010, about four years before The Stars Group bought the site, for gambling losses under a centuries-old statue.

The company’s shares gained $1.64 or 7.9 per cent at $22.47 on the Toronto Stock Exchange after news of the successful appeal.

The Stars Group says it plans to seek the release of a US$100-million bond posted during the appeals process. About US$300 million continues to be held in an escrow fund established under the merger agreement governing the US$4.9-billion acquisition of PokerStars in 2014 by the company then known as Amaya Gaming.

Marlon Goldstein, chief legal officer of the Stars Group, says that it looks forward to putting the matter behind it as “we sharpen our focus on executing on our growth strategy going forward.”

Despite the favourable ruling, the company says it expects the state to either seek a rehearing or a review by the Kentucky Supreme Court, both of which it intends to vigorously dispute.

Maher Yaghi of Desjardins Capital Markets said the ruling removes an overhang on the stock.

“While we had not included the potential downside from a loss in our forecast or valuation, we nonetheless expect this decision to significantly improve investor confidence in the company given its elevated leverage,” he wrote in a note to clients.

Companies in this story: (TSX:TSGI)