Gtech Served Double Blow as Shares Plummet
By philip
Online lottery giant, Gtech Holdings, has seen its share prices fall as it was announced last week that two of its top executives face bribery charges in Brazil. The Brazilian government is suing to invalidate its contract with GTech and impose penalties of close to $650 million, following the alleged bribery scandal which rocked Brazilian politics a few months ago. The National Lottery of Brazil is the company's biggest single customer, accounting for about 10% of revenue.

The news came hot on the heels of an announcement that GTech had lost its online lottery contract in Puerto Rico to arch rivals, Scientific Games – a deal estimated to be worth $66.7 million over a term of seven years.

Some Wall Street analysts, however, played down the importance of these developments, claiming that the Market has over-reacted by slashing 20% off the company's value. Deutsche Bank's Marc Falcone said that the Brazilian risk was already well known and that Puerto Rico was only a minor account.

Only time will tell, however, what effect the proceedings in Brazil may have on the company’s reputation with governments worldwide and potential international contracts. As analyst Paul Meeks of Meeks & York has said, it may be more serious than merely losing a big chunk of its revenue.

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