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Why Bally's Stock Crapped Out Today

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

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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.

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Stocks Mentioned

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

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