It would have been ‘premature’ to dump local iGaming firm shares due to minimum corporate tax deal

Shareholders of Malta-based iGaming companies including Kambi and Evolution "probably reacted prematurely" by selling stocks in the companies when it emerged the country had agreed to an OECD agreement on a minimum global corporate tax rate, according to iGaming Next's Pierre Lindh.

The reaching of the agreement, first reported last week, will see Malta have to withdraw one of its most favourable laws for large foreign-owned corporations, which currently are able to pay an effective five per cent tax rate locally.

Instead, international corporations making a revenue of over $750 million (€650 million) annually will be required to pay a minimum corporate tax rate of 15 per cent.

According to figures compiled by EGR, Evolution's and Kambi's shares both dropped by six per cent after the move was announced.

However, questions about the connection between the dip and the deal are resounding. Especially notable, is that as neither of the aforementioned iGaming companies have previously recorded annual revenues over the threshold, it is unclear whether the deal will effect them when it comes in in 2023.

In 2020, Evolution recorded an annual revenue of €561.1 million and Kambi recorded €117.7 million.

However, it is worth noting that Evolution, having experienced a dramatic uptick in revenues so far this year, seems on track exceed the threshold this year. In H1 2021, the company's operating revenues more than doubled, to hit €492.5 million.

Pausing work on preparations for next week's highly anticipated iGaming Next Conference, Mr Lindh, who in his capacity presenting the company's podcasts is one of the most 'plugged-in' individuals in Malta's iGaming industry, provided his insights to iGamingCapital.mt.

First of all, he made it clear that "it's hard to say how much the decrease was affected by the OECD announcement."

Indeed, the recent volatility across European and US stock markets, related to a number of international issues, makes it hard to draw specific causal connections between stock movements and individual events.

Asked why the stocks would have fallen considering the ambiguity that the companies mentioned would be affected by the deal, Mr Lindh said shareholders were probably reacting prematurely.

Stock movements since the announcement seem to lend weight to this suggestion, as both Evolution and Kambi's shares have since rebounded.

Finally, addressing whether there is a concern that the largest local expanding companies, not far off the threshold will now be reconsidering their presence in Malta, Mr Lindh said that whilst it is "too early to say," he "really doubts the Government would not do anything to retain/attract new companies to the island."