(Bloomberg) -- Evolution AB shares plunged as the Swedish online gambling giant reached out to regulators in New Jersey and launched an internal review after a competitor accused the company of doing business in banned countries.
The stock tumbled as much as 19% to 993 kronor in Stockholm, the most since its 2015 initial public offering. That extended its drop for the week to 31%, reducing the company’s market value by more than 96 billion kronor ($11 billion) to 224 billion kronor.
Chief Executive Officer Martin Carlesund said on a conference call with investors Wednesday that Evolution “pro-actively” contacted the regulators and initiated the internal review “to ensure that we can respond swiftly to any questions.” The company also issued a statement.
The call failed to soothe nerves. Erik Moberg, an analyst at ABG Sundal Collier, said it provided “no answers” and was “rather irrelevant.”
Evolution held the call in response to a letter attorney Ralph Marra sent to New Jersey’s Division of Gaming Enforcement on Nov. 12. Marra said the company allows its products to be played in countries where online wagering is illegal or that are subject to U.S. sanctions. The letter was based on research from private investigators hired by an unnamed U.S.-based rival, people with knowledge of the matter told Bloomberg News.
During the call, and in the statement, Carlesund said the company sells its products only to licensed casino operators and that it doesn’t handle players’ money or screen them.
“It is the operator’s responsibility to comply with the regulation and their own license,” he said.
Until this week, Evolution had been a hot stock, rising 73% this year through Friday’s close and almost tripling in 2020 as pandemic lockdowns spurred demand for online gambling.
The company is a leader in providing “live dealer” games. It sends live feeds of dealers in TV studios out to players who bet real money on the games online.
Carlesund believes the people behind the letter used an internet address from a non-banned country to enter Evolution’s gaming lobby and then make it seem like the company was accepting business from markets subject to sanctions.
“We use all tools at our disposal to block play from certain countries,” he said.
Letter to Regulators
A spokesperson for the private investigators disputed Carlesund’s claim, saying their research and videos show the full process of entering websites, and playing and withdrawing from Evolution games, without any use of any technical manipulation. The people were located in Iran, France, Spain, Hong Kong, Italy and Sweden.
In the letter to regulators, attorney Marra also said a current Evolution executive told the private investigators that the company does business in countries that had U.S. sanctions against them, including Iran, Sudan and Syria.
The methods used by the private investigators were “very questionable,” Carlesund said, adding: “I would not draw any conclusions about our culture based on that report.”
A spokesman for New Jersey’s gaming enforcement division declined to comment.
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