What happened
Shares of Caesars Entertainment (CZR) fell 10.8% in the first half of 2020, according to data provided by S&P Global Market Intelligence, as the casino industry was thrown into turmoil. But it fared much better than most rivals for one big reason.
So what
What saved Caesars' stock was the company's agreement to be bought out by Eldorado Resorts (ERI). Caesars shareholders are to get $8.40 per share in cash and 0.0899 shares of Eldorado stock. Given where shares trade today, Caesars is actually overvalued slightly in relation to Eldorado.
There's not much more to the trading dynamic than that right now. The shutdown of operations in the spring can be overlooked if the buyout goes through, and investors are still betting that it will.
Image source: Getty Images.
Now what
Both Eldorado and Caesars management have given every indication that they plan to complete their merger. That could bail out Caesars from any financial pressure that the pandemic would bring. The concern for shareholders after the deal is complete is whether Eldorado can survive with an even bigger debt load than it had before. I have my doubts, but right now the market doesn't seem to be worried and thinks Eldorado is still a growth stock in the gambling industry.
