Eric Rodawig
Long-term horizon, value

Caesars Entertainment Equity Still Has Essentially No Value: A Capital Structure Arbitrage Trade

Caesars Entertainment (NASDAQ:CZR) stock has tripled over the last six months as a result of two developments: the February approval of online gaming in the state of New Jersey and the April announcement of Caesars Growth Partners. However, the effect of online gaming on Caesars is highly overstated, and the CGP announcement dilutes the equity upside of current shareholders. Meanwhile, CZR's bonds have sold off: the company is facing revenue declines across all of its markets, is generating negligible cash from operations, and is still struggling under a massive debt load of 12x a generously adjusted EBITDA. The tripling of CZR stock combined with the sell-off of the company's bonds presents an excellent capital structure arbitrage trade by...

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