SONA silent on e-gaming

DigiPlus [PLUS 32.10, up 18.9%; 118% avgVol] [link] surged by almost 19% on Monday, outperforming the PSEi and rallying alongside other gaming stocks as investors positioned their bets ahead of President Marcos’ State of the Nation Address (SONA). Traders anticipated potential policy signals from the speech on the heavily scrutinized online gambling sector. Ahead of the SONA, PLUS ended the trading day up by 18.89% to P32.10, joining Bloomberry [BLOOM 4.56, up 2.7%; 133% avgVol], which gained 2.70% to P4.56, on the list of top-traded stocks yesterday. But in his speech, President Marcos made no mention of the controversial industry, which has caught the attention of some lawmakers and groups pushing for a total ban of e-games. Wendy Estacio-Cruz, research head at Unicaptial Securities, told InsiderPH that “[t]his omission seems intentional... It’s possible that the President is still weighing economic considerations, as online gambling continues to generate substantial revenue for both PAGCOR and the government,” Estacio-Cruz added.

MB bottom-line: This isn’t the best-case scenario for PLUS bagholders and speculators, but a complete non-mention is one of the better “outs” we had. The dream scenario would have been President Marcos raising the e-gaming issue in the speech, and then coming down hard against the potential legislation that sought to ban or curtail the availability of e-gaming to the masses, but that outcome was just not likely given the optics and politics of the situation. What we got doesn’t eliminate the risk of a ban or regulation, since a SONA is just a bit of political theatre and not a binding program of the government’s attention for the foreseeable future, but it is at least a bit of a signal that the government isn't interested (for now?) in the populist "opportunity" that the moment provides. Given that, there is likely to be a great deal of price discovery yet for PLUS and BLOOM as investors try to find the right risk/reward balance for these stocks going forward. Whether you’re invested in this stock for the long-term or the short-term, or even just thinking about doing a little meta gambling, please just remember to only bet what you can afford to lose, and to consume the news in-line with the strategy that you’re using to try and make money from this issue. 

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