Friday, November 19, 2010

Harrah's Fails to Sell it To You, Sucka

Harrah's (which is changing its name to Caesar's) canceled their planned IPO citing "market conditions."  I went through what this really means when I wrote about Liberty Mutual last month - the company was unable to attract the valuation that they wanted from the market.  The AP tells us:

"A Harrah's spokeswoman said the company is not commenting beyond Friday's brief statement announcing the cancellation."

So let's speculate (sarcastically) on what market conditions Harrah's could have found so unfavorable, and could have resulted in the canceled IPO...

Could it be that one of the largest IPOs in history (GM) was just completed as a  majorly oversubscribed smashing success that resulted in the deal getting hugely upsized and also priced at the top of the range?

Could it be that the market has rallied TOO MUCH over the last 10 months, and Harrah's just doesn't feel like they are offering prospective equity purchasers enough value?  

Could it be that Harrah's wanted to go back and try to develop some metals and mining businesses to take advantage of the commodity rally?

The S&P is within spitting distance of a 2 year high, asset classes across the globe have surged in an orgy of return chasing, and interest rates remain near multi-year lows.  As far as market conditions, it doesn't get much better than this.  Yet it still wasn't good enough to get investors to buy Harrah's.  That's a warning sign, to me - or maybe a sign that investors still have some sanity left.



Anonymous said...

Quite possibly the owners of Harrah's are waiting for an ever stronger market in the near future?

Shoots KD, we know Apollo and TPG are already sucking major air from their past purchase of this company.


HR Dobbs

Kid Dynamite said...

HR Dobbs - I can't tell if you're kidding or not. My sources tell me that there wasn't interest in the $15-$17 range, and that buyers might have cared around $10 or lower. the PE guys decided to take their chances - roll the dice so to speak (wink wink) instead.

Anonymous said...

Kid-D, no kidding here.

Are not both Apollo and TPG showing major losses whether the offer was priced at $17 or $10?

Why not pull the offer and wait for better times next year?

-HR Dobbs

Kid Dynamite said...

Dobbs - right, so that's basically what they're doing - waiting for a better market because they couldn't sell it in this market... but it's different from waiting for an "even stronger" market... the problem was that there was no demand for their crap in this market.

delay and pray... hope things get better! still, it's a good sign (for sanity, not for a future rally) that the market wasn't fooled by this IPO.

Anonymous said...

Harrahs has inside info on whether online gaming will be regulated in the US. Hence, they delayed the offer.

Big Red said...

Speaking of major recent IPOs, how about a post on GM, KD?

I can not for the life of me see $60B in value in that company. What gives?

Kid Dynamite said...

Big Red - market cap is currently closer to $50B for GM, right? What do you base your statement on? have you done the valuations? I haven't...

Kid Dynamite said...

"TPG, Apollo Said To Overvalue Harrah's"