Why Bally’s Stock Crapped Out Today

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What happened

Investors in casino operator Bally’s (NYSE:BALY) are processing a deluge of news from the company today. So far, they don’t like what they’ve heard, as the stock was down as much as 15% before paring that decline. As of 12:15 p.m. EDT, Bally’s shares are down about 9.5% on the day. 

So what

The new developments were a business update with preliminary first-quarter 2021 results, the acquisition of UK-based online gambling operator Gamesys with an all-cash offer, the purchase of the Tropicana Las Vegas Hotel and Casino, and finally the issuance of $600 million in common stock and $250 million of equity units to pay for proceeds that will be used to help pay for the new spending. 

overhead view of casino players throwing cash in the air

Image source: Getty Images.

Now what

Today’s stock reaction seems to be mostly focused on the added dilution to pay for the company’s growth initiatives. The combination with Gamesys will mean paying about $2.2 billion in cash plus the assumption of debt. Bally’s said the $850 million in equity will go toward the cash portion of the purchase. 

The transaction to acquire Tropicana from real estate investment trust (REIT) Gaming and Leisure Properties (NASDAQ:GLPI), valued at approximately $308 million, will not require a cash disbursement. It includes a sale-and-leaseback agreement relating to Bally’s Black Hawk, Colorado, and Rock Island, Illinois, casino properties to cover the nonland purchase of the Tropicana property. 

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The company’s business update struck a positive note as the travel and leisure sector continues to recover from the pandemic. The company particularly noted the increased demand during the month of March. But the dilution coming with the equity raise seems to have gained most of investors’ attention today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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