Why Caesars Entertainment's Shares Popped
Jul 10th 2013 4:50PM
Updated Jul 10th 2013 4:52PM
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 15% today after saying it was continuing a plan to offer shares in a spinoff.
So what: The company said it plans to offer as much as $1.18 billion in stock in Caesars Acquisition Co., which will eventually own Caesars' online gaming assets as well as Planet Hollywood in Las Vegas and a future project in Baltimore. Caesars Entertainment is using the spinoff and share offering to bolster its balance sheet and stave off a potential bankruptcy because of deteriorating financial results.
Now what: This isn't a new announcement, and people buying shares today are buying the old Caesars assets and only the opportunity to pay $9.43 per share for the new "growth" company. Unless you want to own both, I think the prudent move would be to wait for the new company to trade publicly and then buy shares; otherwise you're just buying into a dilutive offering, which is all this is. I don't think this is any reason to buy the stock, and retail investors should examine this deal carefully so they know exactly what they're buying today.
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