Operating in China is definitely not an easy thing if you are running a gambling business. Boyaa Interactive’s CEO Zhang Wei should know this best. He has been jailed on charges of bribery charges and he seems to be in a difficult situation as China is nothing if not a hardliner on corruption.
After the Financial Ruin, A Personal Crisis
Boyaa Interactive has not had it easy. As regulatory pressure continued to pile on, the game developer for the iGaming industry and casinos had to discontinue a number of social games which buffeted its shares so severely, that they succumbed to the pressure and hit an all-time low. With the latest predicament, the company is facing an existential threat.
Regardless whether there is merit to the allegations wagered against Zhang Wei (mind, that the court found him guilty, but it’s seldom the case where corruption suspects don’t get a sentence), the blow has been dealt and recovery would be difficult. With Zhang incarcerated, Boyaa has been losing its financial purchase.
Following his arrest, though, Zhang acted quickly, dropping all positions he held in the company and partially shielding it from the negative effects his association with it had earned it. He didn’t resign at the time of his arrest though, hoping that he would be able to settle matters legally. However, in the ensuing court battle, he was sentenced to 12 months in jail.
His attempt to disperse the charges levied against him began back in May when he appeared in a court denying having accepted or handed any bribes. However, the proceeding found Boyaa Interaction and him in particular guilty. Zhang bore the brunt of that ruling, having been sentenced to one year in prison whereas Boyaa was fined $350,000.
Emerging from the Ashes
Boyaa Interactive has no intention to cut its business short. Just on Friday, the company announced that it’s replacing Zhang with a newly-picked Chairman of the Board, Dai Zhikang. Because Zhang held multiple positions, more people were elected to take over him. Tao Ying has been appointed an executive director and chairman of the nomination committee.
The difficult restructuring had been reflected in the company’s financial results. Boyaa’s Q2 earnings fell by 34.4% which for many companies could have been tantamount to going belly up. China’s persistence in coming down hard on gambling applications and phasing popular products such as video poker has not helped in the slightest either.
Boyaa has said that while the prosecution against the company has had an effect on the poorer results, but the main factor of the slow performance has been the reams of regulations that have hit the market abruptly, leaving little time for affected entities to prepare and adapt.
Looking Ahead the Bumpy Road
It’s going to be a difficult end of year. Some suspect that the real regulations are further down the road. A looming crisis in the US and Chinese relations can easily see a lot of the value of casinos wiped. The Chinese will not hesitate to hit Macau where a lot of US operators run their activities. A trade war could spell even more hard times for casinos and companies from both parts of the world.