Shares in Tattersall’s and Tabcorp have both tumbled another 5% in morning trade, bringing the total losses from John Brumby’s shock pokies announcement last Thursday to $3.3 billion.

Tabcorp has now dropped from $14.37 to $10.75 – a loss of 25.2% or $1.9 billion as its market cap plunged from $7.54 billion to $5.64 billion.

Tattersall’s is down from $3.66 to $2.56 – a loss of 30% or $1.4 billion as its market cap dived from $4.63 billion to $3.23 billion.

Whilst the duopoly are widely expected to sue for their legislated, contracted and promised $1.2 billion in compensation, like billionaires or multi-nationals who took on Vladimir Putin’s Kremlin, they are soon going to discover who holds all the aces.

For instance, there is absolutely nothing stopping Brumby from putting yet another levy on poker machine revenue for the remainder of the existing licences. He has done that twice before, including just before the 2005 Tattersall’s float, which knocked about 10% off its valuation.

Brumby also has the post-2012 wagering licence as a major negotiating chip. No one has much sympathy for the duopoly, so their best option is to merge and then cut a deal over that wagering licence.

As part of the negotiations, they should issue proceedings and also encourage third parties to raise the prospect of sovereign risk.

The biggest loser from Brumby’s act of commercial bastardry is Australia’s biggest fund manager, The Commonwealth Bank’s Colonial First State operation, which has been buying into the duopoly this year and currently holds 8.1% of Tattersall’s and 6% of Tabcorp.

The Sydney bankers aren’t having much luck in Melbourne this year because they were also the biggest investor in Centro, having smoked about $500 million in that disaster.

If the full Commonwealth Bank political machine comes out against the Victorian Government on this whole sovereign risk issue, it would make for a quite a battle.

Brumby clearly knows he’s vulnerable on this front. On Friday his government refused to put up anyone to front the ABC’s Stateline program, but the Premier subjected himself to a detailed KGB cross-examination on Business Spectator with Alan Kohler, Stephen Bartholomeusz and Robert Gottliebsen.

The duopoly is clearly going to run this corruption line in attempting to defend the old system, but it was hilarious to see former Tattersall’s CEO Peter Gillooly make the following claim in The Sunday Age yesterday:

The original reason for the Tatts and Tabcorp duopoly was to ensure there was no corruption, and the question is now going to be raised as to how the regulator will ensure that no corruption takes place.

Gillooly, of course, was the chairman of Opes Prime, the licensed stockbroking firm which we’re now discovering was the preferred financier for underworld figures who play the stockmarket.

*Check out Stephen Mayne’s Sunday Age opinion piece

Peter Fray

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