Eldorado Crushed by Shorts, Tumbles to Lowest Post-Caesars Announcement Levels, Bears Bashing Others

Posted on: March 5, 2020, 03:20h. 

Last updated on: March 5, 2020, 05:49h.

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

Shares of Eldorado Resorts, Inc. (NASDAQ:ERI) plunged 15.52 percent today on volume that was more than quadruple the daily average, as the stock closed below the nadir seen in the months following the company’s announcement regarding a $17.3 billion takeover offer for rival Caesars Entertainment Corp. (NASDAQ:CZR).

Bearish traders are pounding gaming stocks with Eldorado being a favorite target. (Image: Daniel Sorabji | AFP | Getty Images)

Following the reveal of that transaction, which was announced last June, Eldorado stock slumped from around $55 to just over $35 in September. After that decline, ERI doubled through late February, but bearish traders have subsequently blasted the stock. That made it one of the most heavily shorted names not just in the gaming industry, but among US equities in general.

ERI short sellers have been on a roll recently after being on a losing streak for the first seven weeks of the year,” said S3 Partners Managing Director Ihor Dusaniwsky in a note provided to Casino.org today. “Shorts are up $458 million in year-to-date mark-to-market profits for the year, up 37%.”

That note was sent prior to the close of trading Thursday. After the closing bell, ERI is sporting a year-to-date loss of 41.75 percent, meaning that $458 million figure is likely higher.

Other Ominous Numbers

Entering Thursday just two gaming stocks – FanDuel parent Flutter Entertainment and Caesars – were more heavily shorted than ERI.

Nearly a third of ERI’s outstanding equity, or 21.31 million shares, was sold short to the tune of $876 million coming into today, according to Dusaniwsky. Boding ill for the regional gaming stock is data suggesting bearish traders aren’t covering positions in the casino operator – they’re hammering it in anticipation of more downside.

“Most of the shorting activity occurred recently, over the last week shares shorted increased by +619k shares as its stock price declined by -20.00% ,” said Dusaniwsky.

Since Feb. 20, Eldorado is the most profitable short in the gaming industry at nearly triple the percentage of takeover target Caesars. That’s a stunning repudiation of a stock that has been universally beloved by analysts for months, with some saying it could eventually become a $100 name. ERI closed at $34.74 today.

Another Offender

ERI isn’t the only gaming stock violating some marquee levels. With Thursday’s 12.28 percent slide, one that occurred on more than double the usual turnover, Penn National Gaming (NASDAQ:PENN) has given up all of the gains accrued on the back of the Barstool Sports deal announced in January, and then some.

Penn, which is lower by 20.24 percent, over the past week, is another gaming name currently beloved by bears. Entering Thursday, nearly 10 percent of the Argosy and Hollywood operator’s shares outstanding were sold short.

Since Feb. 20, the only gaming stock that has been profitable to short than Penn has been ERI, according to the data provided by Dusaniwsky.

Today, Penn stock came to rest at its 200-day moving average. A drop below that key technical indicator could embolden short sellers to further punish the shares.