Shortly after Bally’s Corporation (NYSE: BALY) announced it planned to buy back nearly $107 million of its stock today, those shares began slumping.
In the Providence-based gambling company’s statement about the share buy-back, Bally’s emphasized that this news is “preliminary and subject to change.”
UPDATE: 07/27/2022 – Tender Offer Final
Bally’s finalized its share buy-back today and it’s costing the company about $3.5 million less than the nearly $107 million the company announced on Monday.
The company’s paying precisely $3,538,612 less, according to the press release about the $22-a-share repurchase plan.
The announcement also shows this more than $103 million stock buy-back represents 0.3% fewer shares than Bally’s tallied in Monday’s preliminary results:
Bally’s has accepted for purchase a total of 4,697,619 common shares at the purchase price of $22.00 per share, for an aggregate purchase price of $103,347,618, excluding fees and expenses relating to the tender offer. These shares represent approximately 8.9% of Bally’s outstanding common shares.
The company’s stock rose by almost 8% for the day, as of 3:24 p.m.
What Bally’s Did Today
Bally’s has $334.6 million it can use to repurchase its shares, but this time it will only be spending nearly $107 million at $22 a share. That’s because that’s how much shareholders provided to Bally’s by the deadline of 12 a.m. on Saturday.
This may not be Bally’s last share buy-back. After all, the company lost more than half of its value during the past year. So in the announcement today, Bally’s said it may repurchase more stock “from time to time on the open market or in private transactions.”
At market close on Friday, just before the deadline, Bally’s stock sold at $21.82.
The first market opening after the buy-back saw stock open today at $22.65. By 11:10 a.m., its shares were selling for $21.60.
As of 2:48 p.m., the price dipped again to $21.51.
So as of presstime, Bally’s was down 1.28% since the news.
Today’s announcement reads:
Bally’s expects to accept for payment and purchase approximately 4,858,465 common shares at a purchase price of $22.00 per share, for an aggregate purchase price of $106,886,230, excluding fees and expenses relating to the tender offer. These shares represent approximately 9.2% of Bally’s outstanding common shares.
Bally’s Had Its Repurchasing Reasons
Share repurchases may be Bally’s effort to stabilize its stock price while providing shareholders profits.
The $107 million figure is below its own estimates, though. So there will likely be more share buy-backs coming up.
On June 24, Bally’s explained this round of repurchases:
Bally’s board of directors determined that Bally’s should pursue a $190 million tender offer in light of recent capital markets changes. Bally’s currently expects to return capital to shareholders in the future, including through its previously announced $350 million capital return program.
Putting the Bally’s Buy-Back in Context
In terms of capital markets, US stock exchanges are down about 15% this year.
Gambling stocks may be more subject to change if investors deem them “high growth stocks,” NPR explains.
In a June 30 article, NPR says:
Historically, when interest rates rise and borrowing costs go up, investors pull out money from the riskier parts of the economy. High growth companies and tech stocks are the first to see their stocks fall.
So even though Bally’s has been around since 2004 and its casino operations have 10,000 employees, analysts may consider it more volatile than companies in other verticals.
To illustrate that point, Bonus.com took a look at the stock prices of the No. 1 operators in US online casino and sports betting:
- BetMGM has the top US online casino market share. The Jersey City, NJ-based organization is jointly owned by Isle of Man-headquartered Entain and Las Vegas-based MGM Resorts International. During the past year, MGM stock dropped nearly 22%, and Entain’s plummeted almost 46%.
- FanDuel is the No. 1 online sportsbook in the US. The primary owner of the New York-headquartered online gambling operator is Dublin-based Flutter Entertainment. Flutter’s stock fell almost 45% during the past year.
US Online Gambling Is Growing
Connecticut is the most recent state to launch online casino gambling. On Oct. 19, 2021, it became the fifth state to allow online casino and sports betting.
As of this writing, legal online sportsbooks are live in 19 states. They’ve only been permitted to operate since May 2018, when the US Supreme Court repealed the Professional and Amateur Sports Protection Act (PASPA).
This is a quickly growing industry that’s even seeing investment from banks.
The online gambling companies are confident about their futures.
Bally’s is no different.
Bally Bet launched in New York on July 8.
Next, the company with casino operations including “more than 15,800 slot machines, 500 table games, and 5,300 hotel rooms” plans to expand its retail casino footprint.
Today’s press release reads:
Upon closing the previously announced Tropicana Las Vegas (NV) transaction, well as completing the construction of a land-based casino near the Nittany Mall in State College, PA, Bally’s will own and manage 16 casinos across 11 states.
So Bally’s will push forward, slump or not.