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Caesar's IPO Might Not Be a Good Bet, Pros Say
Published Tue, Feb 7 20126:53 PM EST Updated Fri, Sep 13 20134:33 PM EDT
Bruno J. Navarro@https://www.linkedin.com/profile/view?id=64570@pages/Bruno-J-Navarro-Journalist/502472796456058@Bruno_J_Navarro
Casino operator Caesar's Entertainment, which holds its IPO on Wednesday, might not be a good bet for everyone, one analyst said.
"They're basically just dipping their toe into the equity market water right now just to get this done," David Bain, a managing director at Sterne Agee, said on "Fast Money."
Bain said the initial public offering sets the stage for multiple rounds of financing or shares being sold by current shareholders.
Is Caesar's IPO a Bad Bet?
Investors include John Paulson's hedge fund, Goldman Sachs and Deutsche Bank who hold may sell a combined 34.7 million shares after the offering, according to the IPO prospectus.
But should new investors buy in?
"We don't think so unless you assume the domestic economy is going to come roaring back," Bain said.
Caesar's Entertainment, which will sell stock at $9 per share under ticker symbol CZR, has a valuation range similar to Wynn Resorts, Las Vegas Sands and MGM Resorts, he added.
But Caesar's has $20 billion in debt and significant to Atlantic City, N.J., which has been a laggard in the U.S. economy.
Bain expected casino companies with exposures to Macau to trade at higher multiples than those without, such as Caesar's.
His top picks in the sector are Melco Crown Entertainment, which is a pure Macau play, and Las Vegas Sands, which is a Macau and Singapore growth play.
Tim Seymour of EmergingMoney.com wasn't a buyer, partly on valuation concerns.
"With this amount of stock that's out there, I don't think you've really set a benchmark," he said.
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Trader disclosure: On Feb. 7, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Seymour is long AAPL; Seymour is long BAC; Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU
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