The shares of Amaya Inc. (AYA) went down eight percent on Wednesday, as Italy's financial police Guardia di Finanza (GDF) mentioned PokerStars being involved a tax fraud investigation.
Listed on the Toronto Stock Exchange, the parent company of PokerStars and Full Tilt has seen its stocks fall from $31.85 to $29.30 a share, after hitting a day's low of $28.29.
Although the markets have been extremely rapid in reacting to the news, PokerStars position in the investigation is far from clear as Italy's GDF has yet to prove any wrongdoings of the Halfords Media Italy S.r.l., a company that PokerStars uses for marketing activities in Italy.
According to Italy's financial police, the Halfords Media Italy "eroded [its] tax base by decreasing the value of the services rendered to PokerStars. In this way, [the company] could shift the taxation of the income produced in Italy to Malta and the Isle of Man."
Authorities believe that by using this technique — which is known as "transfer pricing" — Halfords Media Italy managed to avoid the Italian taxation on profits for over €300 million.
PokerStars, however, said to be confident that the whole investigation will resolve soon and will prove that the company operations in Italy have always been conducted in line with the country's legislation.
"PokerStars has been working with Italian tax authorities since they launched an audit several years ago," Head of Corporate Communications at Eric Hollreiser told PokerNews as soon as the news about the investigation broke out. "We have operated in compliance with the applicable local tax regulations and have paid €120 million over the period covered by the audit."
Hollreiser continued, "Like many other global e-commerce companies, we vigorously dispute the stance of the tax authority regarding local establishment. The audit is ongoing and we hope to resolve the issue in our favor soon. In the meantime, our operations continue as usual on www.pokerstars.it and we remain focused on delivering the most popular online poker service in the Italian market."
Later on Wednesday, Amaya issued a written statement about the issue, to say that the company was aware of the tax dispute already before it bought the Rational Group in August, 2014.
"The tax dispute relates to operations of PokerStars dating from before the acquisition of the company by Amaya in August, 2014," the note from Amaya says. "The merger agreement related to that transaction provides remedies to address certain income tax and other liabilities that might occur post-closing but stemming from operations prior to the date of acquisition, including monies held in escrow as initial sources for indemnification.
"The current tax dispute is something Amaya was aware of prior to the transaction. Amaya does not anticipate that these tax issues would apply to future fiscal periods. The company's operations continue as usual on www.pokerstars.it and it remains focused on delivering the most popular online poker service in the Italian market."
This is the second time in three months that the markets react negatively to the announcement of an investigation over Amaya's operations. In December 2014, when Canada's Financial Markets Authority announced the launch of an investigation related to the acquisition of the Oldford Group, the value of Amaya's shares dropped by 29 percent and suffered the biggest intraday drop since its initial public offering in 2010.