Why Caesars Entertainment's Shares Jumped
Feb 4th 2013 3:39PM
Updated Feb 4th 2013 4:30PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Caesars Entertainment jumped as much as 12% today after the company announced a debt offering and a potential spinoff.
So what: First, Caesars announced a $1.5 billion debt offering at a 9% interest rate, a very high rate considering what less-leveraged companies are paying for debt. More important, the company announced a potential spinoff called Caesars Growth Venture Partners, a company that would own Planet Hollywood in Las Vegas, the company's online assets, and a development in Baltimore. The online assets would be very attractive to investors if eventually part of a deal.
Now what: This isn't a done deal, and buying Caesars isn't the best move if a piece is spun off. Initial reports and filings suggest that this would be a public company that could be purchased on its own, a much better idea than buying the overleveraged Caesars itself. Caesars would own a majority of the new company, but I would much rather own the online assets than Caesars' aging network and the debt that goes along with it. So, wait for more details about the new company and consider it if it becomes a reality rather than buying Caesars today.
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The article Why Caesars Entertainment's Shares Jumped originally appeared on Fool.com.Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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