Posted: July 23, 2022, 5:42 a.m.
Last update: July 23, 2022, 6:43 a.m.
Hedge fund Standard General slightly reduced its stake in Bally’s (NYSE:BALY) at the casino operator’s recent Dutch auction.
Standard General is controlled by Bally board member Soo Kim. The fund manager offered 360,000 shares at prices ranging from $19.25 to $22 in a $190 million Dutch auction announced by the Rhode Island-based gaming company last month. A Schedule 13D filing with the Securities and Exchange Commission (SEC) confirms the transactions. Shares of Bally’s closed at $21.79 on Friday and are up 12% over the past month.
Bally’s has launched a modified “Dutch auction” tender offer to purchase its common stock for cash at a price per share of not less than $19.25 and not more than $22.00 for an aggregate purchase price maximum of up to $190 million. The tender offer begins today and will expire at midnight, New York time, end of the day on July 22, 2022,” according to a statement released by the company last month.
The auction methodology in the Netherlands is different from the open market share buyback. In a Dutch auction, the price of what is sold is determined by considering all bids to arrive at the highest price.
Bally’s, standard general links are always deep
Despite the aforementioned transaction, Standard General’s ties to Bally run deep.
Kim remains a director and his hedge fund still owns 11.24 million shares of Bally, or 21.7% of outstanding shares, making him the casino operator’s largest investor by percentage. In January, Standard General launched a $38 per share takeover bid for the gaming company, valuing it at the time at around $2 billion.
At the time of the bid, some analysts speculated that Standard General, or perhaps another suitor, would submit a higher bid for Bally’s. Additionally, there were concerns that Gamesys executives who joined Bally’s when the latter acquired the former in 2021 might balk at the offer price. This is because it was lower than the price at which they received shares in the game company.
The regional casino’s board of directors ultimately rejected the opening in May. The aforementioned tender offer was in response to this decision.
Analyst Commentary on Bally’s
In general, Wall Street is positive on the actions of regional casinos. But that outlook comes with the recognition that operators such as Bally’s could be vulnerable to macroeconomic pressures, including lingering inflation and recession fears.
Macro jitters are prompting some analysts to cut estimates on regional game names, and Bally’s could be part of that scenario.
“While our audits continue to suggest a stable regional/online gaming consumer, we are choosing to lower our estimates to model a theoretical recession,” Stifel analyst Jeffrey Stantial wrote in a note published earlier this month. . “To be clear, nothing has changed in terms of trade trends since our last update. However, with valuations as they stand and investors already well ahead of the inevitable downgrades in the Consensus, we see no reason to stay away from the prevailing macroeconomic expectations.