LAS VEGAS--(BUSINESS WIRE)--Prospective investors in the Red Rock Resorts IPO (NASDAQ: RRR) should ask Deutsche Bank how, in its opinion, the value of the gaming company could have more than tripled in little over a year. This and other questions are presented on the www.RRRIPOdissected.org website by UNITE HERE.
A February, 2015, Deutsche Bank analyst report said Station Casinos had an enterprise value of $2.59 billion and an equity value of $624.6 million as of 12/31/14, which would have translated to about $5.39 per share with Red Rock’s fully diluted number of shares outstanding. In contrast, the company announced an offering price range of $18 to $21 per share on April 15.
“There are many red flags surrounding this pricey second-class IPO by Red Rock Resorts,” said Ken Liu, a UNITE HERE gaming analyst. “From the valuation of Red Rock itself to the valuation of the Fertitta Entertainment buyout at the heart of the IPO, there is a lot for investors to digest before they decide whether to buy second-class Red Rock shares with uncertain growth and dividend prospects.”
Institutional investors in gaming include mutual funds by Mellon Capital, Hennessy Advisors, Fidelity, T. Rowe Price, Wellington, Fred Alger, Putnam, Davenport & Co., Charles Schwab, Federated, Gabelli Funds, Baron Funds, American Century, Invesco, American Funds, Lord, Abbett & Co., D.E. Shaw & Co., J.P. Morgan, Goldman Sachs, and Guggenheim. Others include Scopus Asset Management, Driehaus Capital Management, Manikay Partners, Raymond James, PAR Capital Management, Highline Capital Management, Gotham Asset Management, Citadel Advisors, and Park West Asset Management.
UNITE HERE’s critical analysis of the Red Rock IPO has focused on the $460-million Fertitta Entertainment acquisition. Other concerns include: slow growth in the Las Vegas locals market; the company’s lack of concrete growth plans inside or outside of Las Vegas; limitations of its tribal gaming business; corporate governance issues; and potential overhangs due to the expected sale of Deutsche Bank’s large pre-IPO stake and the lack of a cap on future payments under the tax receivable agreement.
UNITE HERE is the union for hotel, casino, and food service workers in North America. UNITE HERE’s Culinary Local 226 and Bartenders Local 165 have a labor dispute with Station Casinos.