Please ensure Javascript is enabled for purposes of website accessibility

Why Bally's Stock Crapped Out Today

By Howard Smith - Apr 13, 2021 at 12:36PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The casino company made four different announcements today, and investors didn't like the bottom line.

What happened

Investors in casino operator Bally's (BALY 7.26%) are processing a deluge of news from the company today. So far, they don't like what they've heard, as the stock was down as much as 15% before paring that decline. As of 12:15 p.m. EDT, Bally's shares are down about 9.5% on the day. 

So what

The new developments were a business update with preliminary first-quarter 2021 results, the acquisition of UK-based online gambling operator Gamesys with an all-cash offer, the purchase of the Tropicana Las Vegas Hotel and Casino, and finally the issuance of $600 million in common stock and $250 million of equity units to pay for proceeds that will be used to help pay for the new spending

overhead view of casino players throwing cash in the air

Image source: Getty Images.

Now what

Today's stock reaction seems to be mostly focused on the added dilution to pay for the company's growth initiatives. The combination with Gamesys will mean paying about $2.2 billion in cash plus the assumption of debt. Bally's said the $850 million in equity will go toward the cash portion of the purchase. 

The transaction to acquire Tropicana from real estate investment trust (REIT) Gaming and Leisure Properties (GLPI 1.83%), valued at approximately $308 million, will not require a cash disbursement. It includes a sale-and-leaseback agreement relating to Bally's Black Hawk, Colorado, and Rock Island, Illinois, casino properties to cover the nonland purchase of the Tropicana property. 

The company's business update struck a positive note as the travel and leisure sector continues to recover from the pandemic. The company particularly noted the increased demand during the month of March. But the dilution coming with the equity raise seems to have gained most of investors' attention today.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Gaming and Leisure Properties. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bally's Corporation Stock Quote
Bally's Corporation
BALY
$25.27 (7.26%) $1.71
Gaming and Leisure Properties, Inc. Stock Quote
Gaming and Leisure Properties, Inc.
GLPI
$51.72 (1.83%) $0.93

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
373%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.