Bally’s Scraps Tangible Equity Sale, Seeks Private Investor on Gamesys Acquisition

Posted on: April 16, 2021, 09:52h. 

Last updated on: April 16, 2021, 10:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Bally’s Corp. (NYSE:BALY) is dropping plans to sell $250 million of its tangible equity units, opting instead to consider a private sale of equity-backed securities to an unnamed strategic investor that made an unsolicited offer.

Bally's stock
Bally’s Atlantic City. The operator is pursuing a private investor to fund part of an acquisition. (Image: Press of Atlantic City)

The gaming company previously said it would sell $600 million worth of equity, granting underwriters of that transaction a month to purchase an additional 15 percent, to fund a portion of its acquisition of online gaming operator Gamesys (OTC:JKTPF).

Bally’s proceeded with the sale of 11 million shares of common stock yesterday at $55, below the closing price of $57.82. As part of that transaction, the casino operator expects the net proceeds of $583.8 million, or $671.4 million if the underwriters exercise their option to buy an addition 1.65 million shares.

Another strategic investor is expected to make a $50 million investment to purchase warrants exercisable for shares of Bally’s common stock at the same price per share as the price to the public in the common stock offering,” said the Rhode Island-based gaming company in a statement. “It is possible that Bally’s will consider the issuance of additional equity or equity-linked securities in the future.”

The operator says there are no guarantees a private placement deal will be reached. It didn’t identify if the investor it’s discussing the transaction with is another gaming company, a private equity firm, or hedge fund. Hedge fund Standard General is Bally’s largest shareholder and founder Soo Kim is chairman of the company’s board.

Bally’s Busy Again

News of the possible private placement caps another active stretch for a gaming company fast becoming synonymous with such periods.

Just this week, Bally’s finalized the Gamesys buy — the largest in the company’s history — pre-released better-than-expected first-quarter revenue numbers, and acquired the Tropicana Las Vegas. The latter marks the operator’s entry onto the Strip.

While Bally’s stock slumped on news of the equity offering, which dilutes current investors, analysts see reason for optimism.

“Shares have since recovered, as recently announced unsolicited strategic investments provide a vote of confidence, while we also believe resilient Q1 results were initially underappreciated in the context of Tuesday’s share reaction,” said Stifel analyst Steven Wieczynski in a note to clients.

He rates shares of the operator a “buy” with a $75 price target, implying upside of almost 30 percent from the April 15 close.

Bally’s Stock Still Inexpensive

Shares of the gaming company are up 368.18 percent over the past year, good for one of the best performances in the industry. Much of that bullishness is driven by the operator’s ongoing push into iGaming and sports betting, as well as efforts to acquire technology to power those ventures rather than outsourcing it to another firm.

As Wieczynski puts it, Bally’s land-based casino business and its move into Las Vegas aren’t being fully appreciated by the investment community.

“We believe BALY’s broader brick-and-mortar footprint continues to garner an unwarranted discounted multiple relative to their peers, with likely upside as mergers and acquisitions close and a full vaccine-driven recovery plays out,” said the Stifel analyst.