What happened

Shares of gaming giant Caesars Entertainment Corporation (NASDAQ:CZR) jumped as much as 24.1% in midday trading after reports of a potential merger leaked out. Shares settled down later in the day and closed up 12.2% on the day.

So what

Reuters reported earlier today that billionaire Tilman Fertitta, who owns the Golden Nugget casinos, has approached Caesars about a potential merger. Details aren't known, but Golden Nugget's smaller size compared to Caesars would likely make this a reverse merger, with Caesars effectively buying Fertitta's company with stock.

A row of slot machines in a casino

Image source: Getty Images.

News reports quickly threw cold water on the potential deal, given Golden Nugget's small size and Caesars' own interest in buying Jack Entertainment. But shares reacted positively to news of a potential merger nonetheless.

Now what

Caesars buying Golden Nugget sounds a little wild, but management may be finding ways to increase the value of a stock that's been stuck in a rut by drumming up merger interest. As with most rumors, I want to see more concrete news before getting too excited about any merger right now. Given the size and complexity of Caesars' capital structure, I don't see a buyout as a likely scenario -- especially so soon after Caesars underwent reorganization itself, which was a long and painful process.

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.