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Clairvest posts loss after Ace2Three shutdown

Toronto-based private equity company Clairvest has posted a net loss for fiscal Q1 of C$11.6 million ($9.1 million), or $0.76 a share, after accounting for potential losses in an investment in Indian online rummy company, Ace2Three.

The group said it had included a $1.00 per share unrealized loss in Ace2Three, which was shut down for nine days in June after the state of Telengana declared online gaming, including skill-based games, illegal.

Clairvest and Clairvest Equity Partners V invested $99.2 million in Ace2Three in April through compulsory convertible debentures and common shares.  

Since June 28, 2017, Ace2Three has reopened its gaming platform outside the state of Telangana, and the Indian courts have provided Ace2Three with interim relief to give the company time to move its registered business address outside of Telangana.

Revenue from customers outside of Telangana represented approximately 60 percent of Ace2Three’s overall revenue prior to the shutdown in that state.

Online rummy companies are challenging the validity of Telangana’s decision, arguing it runs counter to a Supreme Court decision dating from 1996 that declared rummy a skill-based game and therefore legal.

“Clairvest has determined that there has been a negative impact on the fair value of this investment and has reduced the fair value of its equity investment in Ace2Three to 50 percent of its cost, or an unrealized loss of $15.8 million on a pre-tax basis.”

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