Standard General Trims Bally’s Stake in Share Sale

Posted on: December 13, 2022, 03:38h. 

Last updated on: December 13, 2022, 04:02h.

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

Standard General pared its Bally’s position, recently selling 475K shares of the regional casino operator at a price of $22.60.

Standard General
Standard General founder Soo Kim. His hedge is reducing its stake in casino operator Bally’s. (Image: Bloomberg)

A Form 4 filing with the Securities and Exchange Commission (SEC) confirms the sale and that the hedge fund controlled by Bally’s Chairman Soo Kim owns 10.58 million shares of the gaming company following that sale.

Standard General’s recent disposal of Bally’s shares follows a similar move by the firm in July in which it reduced its position in the gaming company in a Dutch auction. The money manager tendered 360K shares at prices ranging from $19.25 to $22 during a $190 million Dutch auction announced by the Rhode Island-based casino operator.

Even with this year’s reductions to its Bally’s position, Standard General remains by far the largest investor in the operator, controlling 22.41% of the shares outstanding, according to Guru Focus. That’s more than double the second-largest investor, HG Vora – another hedge fund. Bally’s is Standard General’s largest equity position.

Standard General Mum on Bally’s Position

Standard General isn’t saying why it’s reducing its exposure to Bally’s stock. But the hedge fund is selling low, as shares of the gaming firm are off 40.12% year-to-date.

In January, the money manager offered to acquire the casino operator for $38 a share. While there was speculation that the offer could be increased — and Bally’s did its due diligence by forming a committee to evaluate the bid and hiring an investment bank — Kim’s proposal was ultimately rejected in May.

There were concerns Gamesys executives who joined Bally’s when the latter acquired the former in 2021 would balk at the offer price. That’s because it was lower than the price at which they received equity in the gaming company.

While Kim expressed disappointment that Bally’s didn’t accept the takeover offer, he said Standard General remains “a supportive, long-term investor in the company.”

Bally’s Investor Concerns

This year, analysts and investors expressed concern that Bally’s may be spending too much capital on expansion plans, including a $1.7 billion effort to bring an integrated casino resort to Chicago. While that will be the only casino hotel in the third-largest US city, it’s a hefty price tag, and one accompanied by some of the highest gaming taxes in the country.

Additionally, analysts previously mentioned Bally’s relatively slow entry into online sports wagering and how long it will take the operator to turn its digital gaming unit profitable. The company’s international interactive unit is also facing potential regulatory headwinds in the UK.

Including Chicago, Bally’s operates 16 casinos in nine states. The company also has iGaming and daily fantasy sports (DFS) entities.