An IPO Hot Enough for Vegas

Many have been expecting the initial public offering (IPO) from the Las Vegas Sands (NYSE: LVS  ) to be hot. The shares were originally priced at $20 to $22 each. Before today's IPO, lead underwriter Goldman Sachs (NYSE: GS  ) raised the target price to $24 to $26 a share. The Sands' financial gain by selling shares at $26 instead of $20 is $142.8 million in cold cash -- hardly chump change.

The final IPO price was $29, and that's not even the big news (although the Las Vegas Sands is certainly jumping for joy). The stocked opened for trading at $36.01 and traded as high as $49.45 -- a whopping 70.5% increase from the IPO price.

The news for the Sands' balance sheet is even better. The underwriters will sell the 3.57 million additional shares they are authorized to sell. So, the company will sell roughly 27.37 million shares for, after fees, around $750 million.

The Sands owns the Venetian Resort Hotel Casino, one of the fanciest digs in Las Vegas. Adjacent to that property the company is building an "ultra-premium" 3,000-suite resort. The company is also in Macau, the only place in China where gambling is legal. The existing Sands Macau will soon be joined by megadestination the Venetian Macau Resort Hotel Casino, which will be the first to bring the style of a Las Vegas property to China.

All this good news comes at a price. At today's high, the company's total 350.6 million shares were valued at $17.3 billion. That is $3.1 billion more than the market capitalization of MGM Mirage (NYSE: MGG  ) and Mandalay Resort (NYSE: MBG  ) combined.

Supporting Sands' stock price is the valuation of Wynn Resorts (Nasdaq: WYNN  ) . It is building casino resorts in Las Vegas and Macau that are scheduled to open in 2005 and 2006, respectively. But the market capitalization of Wynn, which has no operating revenue yet, is $6.8 billion, and the company has $1 billion in total debt. The Sands ended September 2004 with $1.8 billion in total debt and nine-month revenues near $850 million.

While Wynn Resorts' market capitalization may buttress arguments for valuing the Las Vegas Sands, both are priced to perfection in my mind. I'd wonder if a good business move both could make right now, alongside making sure their offerings are strong and unique, would be selling more highly valued shares to knock off a little debt.

For related Fool analysis, see:

The Motley Fool is investors talking to investors. Discuss MGM Mirage and Mandalay Resort Group on the Motley Fool discussion boards.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned -- but likes to visit Las Vegas.


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