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Can Investors Profit From Decreased Stock Prices During The Covid-19 Pandemic?




 

In September 2021, there was an outbreak of a virus that was believed to be caused by a virus from China. However, after the World Health Organization declared that the outbreaks were caused by a new strain of the Coronavirus that was recently termed the "Covid-19". There was an initial spike in cases of fever-like illness and muscle aches within the gambling venues. It was later reported that nearly half of all casino gambling addicts in the United Kingdom did not know that they were infected with the Coronavirus before they began to suffer from serious muscle and joint aches. This pandemic has since subsided but not without cost to the gaming venues throughout the UK.

With that being said, this problem was able to be handled relatively easily through a unique solution that was put forth by the Government in the United Kingdom; which is why the UK government implemented a ban on the transfer of stock options between companies. Basically, stock options are rights that stockholders have to obtain a dividend on. Essentially, if there is an increase of value in the stock market, then the stockholder is entitled to receive a predetermined amount of cash in exchange for their right to sell a specified percentage of their shares. Therefore, stock options provide the gambling venues in the UK as a means to increase their cash flow by providing them with a way to increase their stock ownership without having to resort to raising equity.

However, what makes stock options such an attractive option for casino games is the fact that they can very easily be abused. If a casino's stock price begins to increase then it is easy for that casino's management to use the increased profits from the gaming venues to simply run up the stock price and take advantage of the situation. Essentially, the casino is using the ability of leverage to increase their own wealth without having to actually create any new stock by purchasing actual shares of real estate or other property. In the past, this type of abuse had led to some UK casinos being closed down.

There was actually one United Kingdom based online casino which experienced this very unfortunate abuse during the recent recession. An online casino in the UK known as the Bellagio faced a serious crisis when its stock price began to increase dramatically. Fortunately, authorities were able to prevent that casino from going under and ultimately, they were able to save it from closing its doors. It is still uncertain what the casino will do now since, obviously, it has already lost one of its major gaming venues but the other casinos that are currently operational could very well face the same problems if they do not take additional precautions to prevent similar situations from occurring.

In fact, there are a number of different ways in which a casino online can use stock options in order to increase their own stock ownership. For instance, if a casino is anticipating an influx of new customers that are likely to occur during the height of the pandemic, they can buy up as many shares of that casino's stock as they can afford. This allows them to realize profits once the number of customers actually begins to increase. Of course, the casino itself will have to absorb the additional costs of increased rent and taxes since they will be paying more for the space as a result of the stock being used.

Of course, investors should also be aware of the potential dangers that stock prices can suffer because of government actions. For instance, in the United States, the recent passage of the USA PAT Act has made it harder for people to obtain loans for casino properties. As a result, casino owners are forced to take the option of increasing their rent prices in order to cover their mortgage debt. Obviously, this can have negative consequences for the casino's stock prices. However, investors need to remember that they must carefully consider the potential losses before they make an investment.

 

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