Bally’s Dutch Auction Trims shares an exceptional 9%

Posted: July 26, 2022, 2:53 a.m.

Last update: July 26, 2022, 2:53 a.m.

Bally’s (NYSE: BALY) announced the results of its recently completed Dutch auction, indicating that the program has significantly reduced the regional casino operator’s stock count.

Bally's Dutch Auction
Bally is on the Atlantic City Boardwalk. The operator reduced the number of outstanding shares by 9.2% at a recent auction in the Netherlands. (Image: Play in Pennsylvania)

Last month, the Rhode Island-based gaming company announced plans to repurchase up to $190 million of its outstanding stock through the tender offer at prices ranging from $19.25 to $22. . The period during which investors could offer shares ended last Friday.

Bally’s expects to accept for payment and purchase approximately 4,858,465 shares of common stock at a purchase price of $22.00 per share, for an aggregate purchase price of $106,886,230, excluding fees and expenses related to tender offer,” according to a statement released by the company. “These shares represent approximately 9.2% of the outstanding common shares of Bally. »

The auction methodology in the Netherlands is different from the open market share buyback. In a Dutch auction, the price of what is sold is determined by considering all bids to arrive at the highest price.

Bally’s Advantages of the Dutch Auction

Although the Dutch auction is not a stock buyback program in the traditional sense, Bally’s and its investors nonetheless benefit from the reduced number of shares outstanding.

Casino operators and equipment suppliers are showing their commitment to buy-back plans. Over the past 10 months, at least a dozen casino operators and gaming providers have announced share buybacks. Investors like stock buyback plans because, unlike dividends, shareholders pay no tax when a company buys back its own shares.

Additionally, by reducing its number of shares outstanding, Bally’s can potentially increase its earnings per share (EPS). There is flexibility. A company is not obliged to buy back the full amount specified in a Dutch buyback or auction plan.

Hedge fund Standard General, which is Bally’s largest investor, participated in the Dutch auction, offering 360,000 shares at prices ranging from $19.25 to $22.

Other avenues for shareholder rewards

Like so many casino operators, Bally’s suspended its dividend during the early days of the coronavirus pandemic, but as evidenced by the aforementioned stock offering, the company maintains some level of commitment to shareholder rewards.

In the short to medium term, this should include a focus on redemptions as there is no indication when the gaming operator will resume its quarterly payout. Additionally, the company has dry powder with which to continue to significantly reduce the number of shares outstanding.

“Bally’s may, in the future, decide to repurchase shares from time to time in the open market or in private transactions, subject to applicable law,” he said in the statement. communicated. “Any of these repurchases may be effected on the same terms or on terms more or less favorable to the selling shareholders in such transactions as the terms of the tender offer. Bally’s currently has $334.6 million available under its previously announced capital repayment program.