Shares of Caesars Entertainment do well in initial offering

At first thought, maybe Caesars Entertainment Corp. should have publicly listed more than just 1.4 percent of the company.

The Las Vegas-based casino operator re-entered the stock market for the first time in four years Wednesday, and shares flew out of the gate. At one point, the stock was up more than 80 percent, with investors buying and selling shares at a rapid pace.

By the end of a fever-paced trading day on the Nasdaq Global Select Market, shares in Caesars closed at $15.39, up $6.39, or 71 percent, from the initial asking price of $9.

Almost 11.5 million shares were traded.

Caesars said it would raise a little more than $16 million through the initial public offering before deducting costs, leaving analysts to speculate what might have happened if the company has released more than just 1.81 million shares of common stock.

"What we saw was a tremendous demand for the stock by investors because the company put just a small amount of shares on the market," said Brian Gordon, a principal in Las Vegas-based financial adviser Applied Analysis. "The substantial jump may have been fueled by investor speculation."

The volume could reflect sales by private investors, who were immediately able to sell more shares as the stock is trading publicly.

Under a deal worked out with certain investors, roughly 19 percent of the company could go on the market, including shares held New York hedge fund Paulson & Co., which owns 9.9 percent.

Apollo Management Group and TPG, the private equity firms that took the company private in a $29 billion buyout in January 2008, aren't selling shares in the current offering.

Apollo and TPG own about 70 percent of Caesars following the IPO.

"What we don't know is how much existing stockholders placed into the market," Gordon said. "We won't know that figure until the regulatory filings (with the Securities and Exchange Commission) start coming out."

The IPO valued Caesars at about $1.14 billion overall because it includes just 1.4 percent of the company's outstanding stock. After Wednesday's market close, the company's new market capitalization was more than $1.9 billion.

Caesars has about $19.6 billion in debt and interest expenses of about $1.5 billion.

Analysts said Caesars wanted to go out with a small IPO to establish a market for the company's stock. According to a sale prospectus the company filed with the SEC, Caesars registered as much as $500 million in shares that could be released. The company tried to go public in late 2010 and raise as much as
$532 million, but that IPO was canceled and market conditions were blamed.

The company operates 10 resorts on or near the Strip including Caesars Palace, Harrah's, Paris Las Vegas, Bally's, Flamingo, Planet Hollywood Resort and the Rio.

The company was formed in June 2005 when Harrah's, then a publicly traded company, acquired Caesars Entertainment Inc. in a $9 billion buyout. It is one of the few casino operators expanding as the gaming industry recovers from the recession. With 52 casinos in 12 U.S. states and seven countries, the company is building casinos in Cincinnati and Cleveland through a joint venture with an Ohio company.

In Las Vegas, Caesars is proceeding with Project Linq, a $550 million nongaming retail, dining and entertainment development on the Strip, anchored by a 550-foot London Eye-style observation wheel.

Caesars officials said they already have raised the money to build Project Linq.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
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