Fertitta Brothers – The Largest Beneficiaries in the Station Casinos IPO
Station Casinos set sail on the National Association of Securities Dealers Automated Quotations (NASDAQ) on the Wednesday of last week, under the corporate name Red Rock Resorts, with the ticker symbol of “RRR” and raised a total of USD 531.4 million.
The IPO for has long been in the books for the company and the upsurge of profitability came at the same time as the recovery of the Las Vegas market, which has also been the main source of revenues for the casino. The majority of the proceeds from the floatation will go the Fertitta brothers – Frank Fertitta and Lorenzo Fertitta, who are the founders and majority shareholders of the Station Casinos with 57 per cent stock, through the planned purchase of the Fertitta Entertainment Company for USD 460 million.
Station Casino and their existing shareholders priced 27.25 million shares of the company at USD 19.50 each; in the middle of the expected range of USD 18 to USD 21. At the time of writing, the shares were trading at USD 18.76.
Station Casino had floated their stocks for the first time, in an attempt back in 1993; however, Colony Capital, a private equity group and the Fertitta brothers purchased the business in a USD 5 billion leveraged acquisition, in 2008, just before the Great Recession.
Stock Market Ups and Downs
The casino industry, especially the local market in Las Vegas, suffered heavily during the recession. The Station Casino acquired heavy debts and Chapter 11 bankruptcy was filed in 2009; after two years, Deutsche Bank took ownership of 25 per cent of the casino; and after agreeing to hold USD 1 billion of its debt, the casino re-emerged. By this time in 2011, the market had also started showing signs some of recovery.
Station Casino has gathered a reputation for steady performance since then; with 18 back to back financial quarters showing growth in cash flow and reports of the highest revenues since its inauguration in recent months, they had become ready for the IPO. A decision to float the casino shares was approved in January, this year, but was deferred due to the wildly unpredictable nature of the stock market so far, this year; there has been an acute shortage of IPOs so far in 2016 but with MGM Growth Properties , which went public early last week and now Red Rock Resorts, we may start to see a gradual surge in surfacing of other IPOs too.
Las Vegas Union Opposition
The Las Vegas union / Culinary Workers Union has long opposed the anti-union Station Casino and were keen on disrupting the IPO. Last year they even launched a radio campaign to denounce Deutsche Bank, the majority shareholder and sponsor for the IPO, for their involvement in the Libor rate-rigging scandal. Many banks were found guilty in the scandal, for misrepresenting and falsely inflating and deflating their interest rates to generate fraudulent profits from trades and create a more creditworthy image for themselves; the Deutsche Bank was fined USD 2.5 billion in connection with the financial scandal. The union challenged the financial regulator asking why this was not highlighted in Station Casino’s filing as potential investors were privy to this information; no response on the matter has yet been reported.