Indy Gaming: What are Carl Icahn’s intentions after latest Caesars stock purchase?
I had a brief phone interview with Carl Ichan back in 2010 when he was buying the bankrupt Fontainebleau project. “We buy the shit no one else wants,” Ichan told me after his $150 million lowball bid was accepted. Ichan has always profited when he’s invested in Las Vegas and gaming. We will see if his latest Caesars deal hits another jackpot.
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Billionaire investor Carl Icahn has not lost his fascination with Caesars Entertainment.
Bloomberg News reported last week that Icahn — who made millions by selling his company stock four years ago after helping increase its value — has acquired an undisclosed stake in the gaming company, which operates 52 casinos and resorts in 18 states including 15 properties in Nevada. The story caused the company’s stock price to increase more than 15 percent and led to speculation over his intentions.
“I like Caesars and I own some stock, I would never do activism in Caesars," Icahn told CNBC after the news broke.
Icahn, 88, whose net worth is $5.4 billion according to Forbes, doesn’t do things quietly.
His activism in Caesars, starting in 2018, led to his control of 25 percent of the company’s shares. He oversaw a corporate management shake-up, the appointment of three of his associates to the company’s board and the eventual sale of Caesars to the much smaller Eldorado Resorts for $17.3 billion.
After the deal was finalized, Icahn cashed out. His associates left the board and Eldorado Resorts became Caesars Entertainment, controlled by the Carano family with Eldorado CEO Tom Reeg moving into the same position.
So what does this latest move by Icahn mean?
Caesars has not commented nor acknowledged the Icahn investment in a Securities and Exchange Commission filing, which is required if the acquisition represents 5 percent or more of the outstanding shares.
Bank of America gaming analyst Shaun Kelley suggested the investment was an endorsement by Icahn of Caesars' current direction and management.
At the end of April, Caesars reported a 1 percent decline in revenue during the first quarter and a 10 percent decline in cash flow, but the investment community didn’t appear overly concerned.
The company touted its two new temporary casinos in Virginia and Nebraska, a renovation of its Caesars New Orleans resort and its focus on digital gaming, which saw revenue jump 19 percent from the prior year.
“We feel good about where we’re sitting [and] what the rest of the year looks like,” Reeg said on a conference call.
Icahn has long retained an active interest in Las Vegas and the gaming industry — primarily with distressed properties.
In 2008, he made a $1 billion profit when he sold the Stratosphere, both Arizona Charlie's and the Aquarius in Laughlin to a private equity firm for $1.3 billion. Two years later, he became the largest shareholder in the former Tropicana Entertainment when the business emerged from bankruptcy. Icahn’s company eventually sold the nine casinos in five states to different parties.
Icahn acquired the Fontainebleau Las Vegas out of bankruptcy in 2010 for $150 million. The Strip property was 70 percent complete, but Icahn held on to the unfinished resort for seven years, selling off furnishings, other interior items and a construction crane at the top of the building.
He sold the property in 2017 to New York developer Steven Witkoff for $600 million, netting a $450 million profit as his distressed property strategy paid off. The Fontainebleau was eventually completed by its original developer, Jeffrey Soffer, and opened in December.
Resorts World Las Vegas struggles in the first quarter
Revenue generated by Resorts World Las Vegas declined almost 2 percent in the quarter that ended March 31 and was down more than 11 percent from the preceding three months, according to a securities filing by its Malaysia-based owner, Genting Berhad.
Company executives for the $4.3 billion Strip property, which opened in June 2021, told an investment firm that event cancellations and a lower win percentage by the property’s casino were reasons for the decline. The results were first reported by Inside Asian Gaming.
Quarterly revenue at the property was $214 million, and cash flow declined 23 percent compared to a year ago. Hotel room occupancy increased slightly to 89 percent but saw a decline in the average daily room rate from $319 to $298. The bulk of Resorts World’s 3,500 rooms are operated through a franchise agreement with Hilton Hotels Corp.
What I'm reading
Commentary: How A’s owner John Fisher might pay for his stadium on the Las Vegas Strip — John Shea, San Francisco Chronicle
My old college pal wonders if the A’s owner can complete his Coliseum-to-Sacramento-to-Las Vegas mission.
What Dade Phelan’s primary win means for Texas casino development — Joe Lovinger, The Real Deal
We’ll see if the $850,000 Miriam Adelson invested in the Texas House speaker’s re-election pays off for Las Vegas Sands’ gaming ambitions in the Lone Star State.
Illinois progressive sports betting tax heads to Pritzker’s desk — Chris Altruda, Sports Handle
The governor is expected to sign the legislation, which sports betting operators oppose. It would increase the tax from a flat 15 percent to an adjusted tax of 20 percent to 40 percent on revenue.
News, notes and quotes
Investment group rips Penn Entertainment
Hedge fund Donerail Group wants Penn Entertainment to sell some of its 43 gaming properties in 20 states to boost its stock price, which has fallen more than 38 percent in the last year. In a letter to the company’s board last week, Donerail managing partner Will Wyatt criticized the company’s investments in sports betting and other digital operations. In Nevada, Penn operates M Resort in Henderson and two casinos in Jackpot.
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Sports betting: A’s pitcher suspended for a year; Padres player gets lifetime ban
Oakland Athletics pitcher Michael Kelly was one of four players suspended for a year by Major League Baseball for violating anti-gambling rules. Kelly placed 10 bets involving nine major league games as a member of the Houston Astros’ Triple-A team in 2021, according to CNN. San Diego Padres infielder Tucupita Marcano was banned for life for placing more than $150,000 on baseball bets while he was a member of the Pittsburgh Pirates.
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Mandalay Bay completes convention center remodel
MGM Resorts International completed a $100 million, two-and-a-half-year redesign of Mandalay Bay’s 2.1 million-square-foot convention center. The remodeling effort included upgraded technology infrastructure, signage and a new design. The location hosted several high-profile events while the remodeling occurred, including serving as the media center during Super Bowl LVIII in February.
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Boyd Gaming’s New Orleans casino opens Thursday
Boyd Gaming will officially move gaming away from a riverboat docked on Lake Pontchartrain into a 48,000-square-foot land-based Treasure Chest Casino on Thursday. Boyd spent $100 million to double the size of its gaming floor in the New Orleans community of Kenner. The facility kept the same name as the riverboat, which hosted customers for 30 years. The new building includes four restaurants and conference space.