Following the Philippine gaming regulator's decision to revoke the license of its Asian partner, One Visaya Gaming Corp (OVGC), Evolution AB's [EVO] stock dropped 6% on the Nasdaq Stockholm exchange on Thursday. Following a downgrade by J.P. Morgan on Friday, the stock continued to be under pressure, dealing the live-dealer expert a double blow.

In June, the Swedish firm opened a new live-dealer studio in Asia in collaboration with OVGC, a company based in Cebu City, Philippines.  The partnership was referred to as a "major milestone in our long-term commitment to the region" at the time.  Additionally, Evolution's games are available at BigWin29, an online casino run by OVGC.

 

Failure of KYC

Due to noncompliance, gaming regulator PAGCOR informed Bloomberg on Thursday that it has cancelled OVGC's B2C online casino license.  The business had failed to do the know-your-customer (KYC) checks that were necessary to stop money laundering and fraud.

The new deadline for OVGC to shut down BigWin29 is October 8.  The combined studio project hasn't been damaged, either, because the company's B2B license hasn't.

"The B2C and B2B licenses are fully independent from each other and there is no issue with the studio,” Evolution spokesperson Adrian Westman told Bloomberg.

Nevertheless, the stock suffered from investor punishment, losing almost SEK 9.6 billion ($880 million) in value.  This year, Evolution has lost about 11.35%, while the OMX Stockholm 30 index has gained about 9.08%.

 

JPMorgan Downgrade

JPMorgan lowered its price objective for Evolution from SEK 830 to SEK 675 on Friday, and downgraded its rating from Neutral to Underweight.  Analysts pointed to increased regulatory uncertainties in Asia, margin pressure, and declining growth in Europe.

The consensus is still tilted toward buying, but other brokers are more optimistic.  However, the downgrading highlights rising investor concerns about Evolution's ability to maintain double-digit growth in emerging areas like India and the Philippines.

One of the most lucrative gaming businesses in Sweden, Evolution, has frequently come under fire for its regulatory vulnerability.  The corporation refuted claims made by short sellers in 2021 that its games were being sold in illegal markets.

Following a court filing in August that contained secretly recorded video of Evolution officials admitting that the company's casino products had found their way into illegal markets like China, Iran, and Sudan, Evolution's stock fell precipitously.