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Why Caesars Entertainment's Shares Popped

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 (NASDAQ: CZR  ) 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.

Interested in more info on Caesars Entertainment? Add it to your watchlist by clicking here.

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Related Tickers

9/30/2016 4:00 PM
CZR $7.45 Up +0.05 +0.68%
Caesars Entertainm… CAPS Rating: *