Paulson Adds Bally’s to Hedge Fund Portfolio

Posted on: August 17, 2021, 01:05h. 

Last updated on: August 17, 2021, 03:36h.

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

John Paulson’s eponymous hedge fund initiated a new position in casino operator Bally’s (NYSE:BALY) in the second quarter.

paulson bally's
Hedge fund manager John Paulson, pictured above. His namesake firm bought a stake in Bally’s. (Image: CNBC)

A Form 13F filing with the Securities and Exchange Commission (SEC), released Monday, revealed Paulson & Co. bought one million shares of the Rhode Island-based regional casino operator during the April through June period. That stake was valued at $54.11 million, but is now out of the money, as Bally’s followed other gaming equities lower over the past several months.

Down 11 percent over the past week, Bally’s stock trades around $45 at this writing. As for Paulson & Co., the hedge fund started 11 new positions in the second quarter. Bally’s is the third-largest, trailing only energy equities Apache (NYSE:APA) and Royal Dutch Shell (NYSE:RDS.A).

Major institutional investors, including hedge funds, are required to file 13F’s within 45 days of the end of the prior quarter. But they are not required to disclose the dates on which they bought or sold securities, so there’s no way of knowing exactly when Paulson & Co. entered the Bally’s position. Likewise, whether or not the money manager still owns the stock won’t be revealed until the firm’s next 13F is filed, which will likely happen in mid-November.

Bally’s a Departure for Paulson

The 13F reveals Paulson & Co. has about 40 equity positions as of the end of the second quarter. Paulson himself has long been a gold bug, and that’s reflected through holdings in multiple mining equities and a bullion-backed exchange traded fund (ETF).

While several other consumer discretionary names dot the hedge fund’s portfolio, Bally’s is the lone gaming equity in the lineup. Casino stocks have long been popular in the hedge fund community. But Paulson hasn’t been overly active with gaming stocks for some time.

However, Paulson has previously been involved with the industry. The financier, who made billions betting on the subprime mortgage bust leading up to the global financial crisis, once held a substantial position in Harrah’s debt that was converted into equity in the gaming company that would eventually become Caesars.

In 2010, his hedge fund was also the second-largest shareholder in the company previously known as MGM Mirage, and he was also a major investor in Boyd Gaming (NYSE:BYD). Paulson held shares of MGM for several years and is viewed as one of the investors instrumental in prompting the gaming company to monetize its real estate assets and spin-off the firm now known as MGM Growth Properties (NYSE:MGP).

Paulson Plans for Bally’s

It’s not immediately clear if Paulson is angling to be an activist with Bally’s. For now, the asset manager likely doesn’t own enough shares in the gaming operator to take such a position. Plus, that could put it at odds with Standard General — the hedge fund that’s, by far, the largest Bally’s shareholder.

Ultimately, Paulson & Co. may simply be betting on Bally’s track record of smart acquisitions, an expanding land-based casino empire, and the company’s efforts to capitalize on the booming iGaming and sports wagering markets.