The Government is selling its share in the Georgian Lottery Company
On January 14, 2016, the Georgian government put up 70% of its shares in the Georgian Lottery Company for sale. The auction was to end on January 28, but the deadline was extended to February 4 and then again to February 11.
The current price for the 70% of the shares stands at GEL 13,4001. Additionally, the buyer needs to pay approximately GEL 217.2 million: GEL 216.3 million in tax liabilities (95% of the liabilities, most of which is lottery tax, fines and penalties, accumulated as of 2015, after the company was transferred to the Georgian Post in 2011), and the company's accounts payable, etc.
Having examined the GLC’s financial position (the income statement and balance sheet in 2009 - 2015), we believe that:
the company has been patently mismanaged for years. Sales by September 30, 2015 decreased almost 240% compared to 2010, while the company's loss from 2010 to 2015 increased 457%, GEL 215.3 million. We do not know what the Ministry of Finance has done to collect GEL 216.3 million of the company’s tax liabilities or if the company’s management has been held to account.
it is inconceivable how the auction can attract best offers when the information on the company’s financial position is clearly insufficient to make an informed decision. Apart from this, the initial two-week deadline was too short for a potential buyer to request the required information.
the winning bidder will have to pay the initial price of GEL 13,400, while the payment of the rest of the sum (GEL 216.3 million) will have to be agreed with the agency for state property. Thus the terms on which the buyer will make the rest of the payment have not been made public. Therefore, it is important that the payment should be made at an adequate rate rather than delayed in time so that the money doesn’t lose too much of its value.
the Georgian government nationalized the Georgian Lottery Company in 2009, which created a monopoly. While denationalization is a step forward, the lottery market remains monopolistic. Now that the right to organizing national lottery has been exclusively held by a single company for the past seven years, the GoG’s intentions regarding the monopoly have yet to be made clear.
1The initial price was GEL 1000, which rose to GEL 13,400 as of February the 9th, 2016.