Investors’ fears about the future of Chinese online gambling company PCG Entertainment (PCGE:AIM) have been alleviated after the microcap says it’s in a strong position to defend a debt repayment claim of $2.1 million.
Shares in the £9.4 million cap crashed 35% on 31 May when it said a former shareholder of Center Point Development Corporation – the Asian gaming company it acquired in August last year – had failed to repay a debt to a supplier.
This has resulted in a dispute between the supplier and PCG Entertainment, despite PCG previously signing an agreement absolving it of any responsibility for the debt.
PCG says it’s in a strong position to defend the claim and reckons it can reach a negotiated settlement without recourse to legal action, nudging the shares up 9.5% to 0.6p.
It also says it’s in discussions with several media companies regarding distribution deals which it hopes to close in the coming months. These include a snooker series distributed by a major satellite network in China, a reality TV ‘Search for a Motor-Racing Star’ and a horse-racing tipping service.
The stock has fallen by 90% over the last 12 months as a result of the ongoing suspension of online lottery sales in China – formerly PCG’s core business.
A debt dispute – which PCG admits could materially affect its trading and financial position in the future – is unlikely to reverse this steep decline.