500.com continues to fall on Chinese lottery sale regulation rumors, bringing up the question of whether  lottery sales in China will remain legal.  GeoInvesting believes to have narrowed the cause of the sell-off to a column from a Chinese website run by internet company Tencent. The title to the piece, when translated, is “Sports Lottery Centre: Online Lottery Sales are Illegal.”  We think the title could be slightly misleading and could have possibly caused panic selling, as the body of the article seems to point out that this is only about one particular provincial sports lottery center in China, Guangdong Province, reportedly claiming that it didn’t cooperate with or authorize any internet company or individual to operate sports lotteries. It doesn’t seem to be a statement from the Chinese central government.  In light of these findings, GeoInvesting does believe WBAI stock to be flirting with oversold territory.

Policy Risk in Online Lottery Sector

However, we believe the uncertainties the online lottery sector are increasing in terms of policy risk. According to the WBAI’s 10-K, it claims that it is:

“one of the two entities that are authorized by the Ministry of Finance, or the MOF, to provide online lottery sales services on behalf of China Sports Lottery Administration Center, the government authority in charge of the issuance and sale of sports lottery products in China.”

Meanwhile, we continue to pursue a meeting with WBAI’s management regarding last quarter’s disappointing earnings.

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