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Why Shares of Eldorado Resorts Rose as High as 17.5% on Friday

By Travis Hoium – Updated Apr 24, 2020 at 4:42PM

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Could a fire sale of assets be good for the casino operator?

What happened 

Shares of Eldorado Resorts (ERI) jumped as much as 17.5% in late trading Friday after the company announced the sale of two casino resorts. At the end of the trading day, shares had settled to a 14.4% gain. 

So what

Eldorado announced that it's selling the Eldorado Resort Casino Shreveport in Louisiana and the MontBleu Resort Casino in Lake Tahoe to Twin River Worldwide Holdings (BALY 4.40%) for $155 million in cash. This will raise cash that will be used to close the Caesars Entertainment (CZR) acquisition, due early this summer. 

Slot machines on a casino floor.

Image source: Getty Images.

What's odd about this deal is that it cancels a much more lucrative sale that Eldorado had already agreed to. Maverick Gaming was going to pay $230 million for just the Shreveport resort; that deal is now off, and the deposit has been returned in exchange for the lower offer from Twin River. 

Now what

This may move Eldorado a step closer to closing the Caesars acquisition, but it shows what a high cost the company will have to pay to get a deal done. The value of the casinos it is selling is falling, and debt costs are likely rising as well. Given the current economic backdrop and the highly leveraged Caesars acquisition, this isn't a casino stock I would bet on, even if the market was high on it today. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Eldorado Resorts, Inc. Stock Quote
Eldorado Resorts, Inc.
ERI
Caesars Entertainment Corporation Stock Quote
Caesars Entertainment Corporation
CZR
Bally's Corporation Stock Quote
Bally's Corporation
BALY
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