In a recent development, Standard General, a prominent hedge fund, has upped the ante by offering to purchase all the outstanding shares it doesn’t already control in casino operator Bally’s Corporation. The fund, which presently holds a significant 25% stake in Bally’s, floated its intent through a non-binding letter that was disclosed via a 13D filing with the US Securities and Exchange Commission (SEC).
The hedge fund has proposed a purchase price of $15 per share to Bally’s shareholders. This offer represents a generous 41% premium over Bally’s last closing price before the offer was made public. On the Friday preceding the disclosure, Bally’s shares closed trading at $10.55 per share, indicating that the gaming company’s market capitalization had surpassed $600 million. Reacting to this news, Bally’s stocks experienced a surge, climbing 25.24% to $13.30 per share following the offer’s announcement.
Delving into the specifics of the offer, the letter suggested that any transaction would hinge upon the approval of Bally’s board of directors. The hedge fund anticipates that the board will put together a special committee composed exclusively of independent directors tasked with evaluating the offer and making recommendations thereafter.
For Standard General, this is not their maiden attempt at a full acquisition. In January 2022, a similar offer was submitted at $38 per share. By now reassessing Bally’s at a markedly reduced value, over 50% less than the previous bid, Standard General underscores the dramatic shift in the company’s valuation context. At the time of the first bid, Bally’s was appraised at north of $2 billion. Soo Kim, Standard General’s chairman, had remarked that the offered price of $38.00 per share was at a 30% premium over the closing share price of $29.27 as registered on January 24, 2022.
However, recent times have presented their fair share of struggles for Bally’s, as reflected in its financial outcomes. Despite a decrease in total operating costs by 8.7% to $2.34 billion in the most recent fiscal year, the company nevertheless reported a significant net loss. After accounting for additional expenses amounting to $289.7 million, a pre-tax loss of $167.6 million was recorded—an improvement from the loss of $454.5 million the previous year. Adjusted EBITDA also suffered, slipping down 3.9% to land at $527.3 million.
The previous year was punctuated by notable events for Bally’s. The company announced an aggressive cost-cutting measure by reducing 15% of its North American interactive workforce early in the year. Adding to its challenges, Bally’s found its brand associated with the looming bankruptcy of Diamond Sports Group, operators of Bally’s branded TV sports networks. Nonetheless, the latter part of the year brought a semblance of optimism under the leadership of new CEO Robeson Reeves, who assumed the position in March.
Among the strategic highlights was Bally’s decision to outsource their sports betting technology stack to Kambi and White Hat Gaming. Furthermore, Bally’s ventured into the UK igaming market, launching a Bally-branded online casino in collaboration with Gamesys, utilizing their existing Megaways Casino platform.
As it stands, the ball is in Bally’s court to decide how they wish to proceed in light of Standard General’s proposal. What unfolds from here could shape not only the future of Bally’s Corporation but also set a tone for the dynamics of ownership and strategic management in the gaming and entertainment industry amidst evolving market conditions.
