More Money Printing and Las Vegas Sands' Macau IPO

I was struck in much of my reading of the G20 meeting this weekend, especially in the UK papers, about how the central bankers' actions - specifically in the U.S. and US-mini me (UK) - are designed specifically to inflate assets. So while we mock it, it seems to be an implicit strategy... the idea is increased asset prices flood into all other parts of the economy. Sort of how the U.S. economy was run the past 6-7 years using housing as a prop (house ATM) for spending.

I can see the logic in it, while disagreeing with purposeful manipulation of values to create a false sense of prosperity. More importantly, I guess it was a cold splash of water that the central bankers want these epic rallies in every asset on Earth, and are not in any way troubled by them. In fact they apparently cause the Anglo Saxon central bankers joy...

Which brings us in a tangential way to Las Vegas Sands (LVS) and its Macau IPO in Hong Kong. Whereas just 10 days ago the talk was the IPO would bring in $2B to $3B, we've seen the terms set, and the low end is up by $500M and the top end by $300M. Not too bad for 10 days of money printing. Maybe they should wait another week, maybe they could get $4B? Another month more? $5B? I'll be curious if there is a "sell the news" reaction once the actual IPO hits, but there is no denying the more the company gets from the IPO the more debt they can extinguish. Somewhere, Mervyn King and Ben Bernanke are exchanging hugs.

Via Reuters:

• Shares of Las Vegas Sands Corp (NYSE:LVS - News) rose 7 percent on Monday after the casino operator said it would look to raise up to $3.35 billion through an initial public offering of shares in its Macau business.
• The IPO of the Macau assets "does give the company much needed extra liquidity and flexibility, so it is a positive development for Las Vegas Sands and a positive sign for the industry in general that they are able to tap that market," said Matthew Jacob, an analyst with Majestic Research.
• Las Vegas Sands said in a filing with the Securities and Exchange Commission that the offering price for the 1.87 billion shares of Sands China Ltd. was expected to be between $1.34 a share and $1.79 a share.
• The gaming and casino company has struggled with a heavy debt load, and is looking to seize on an opportunity to have a publicly traded division in Hong Kong at a time when the IPO window is open.

Author's Disclosure: Long Las Vegas Sands in fund; no personal position

Comments

[Mark Bern]

Perhaps it isn't such a bad investment. When people get depressed, they sometime take desperate actions. Some drink, some eat, and some gamble. Drinking may give them temporary relief and help them forget. Eating gives them the satisfaction they can't get elsewhere. Gambling gives them temporary false hope. And a few win. That may make the news or surely gets spread via word of mouth. The losers are forgotten; never spoken of again.

It seems to parallel the contents of government reporting. Emphasize the glimmers of hope and bury the bad news. Reality in the spin cycle!

2009 Nov 10 09:02 AM

[HarryHope]

I must be missing something. If LVS raises money through its Macao IPO, isn't it effectively selling a part of it's Macau operations? How does that really make LVS stronger? It would seem it enables LVS to avoid a problem with its debt but at a cost of divesting itself of a valuable asset.

2009 Nov 10 10:34 AM

[TraderMark]

Depends if the market values a "spun off" Macau more than it would if it was inside the company. For example LVS Market cap could be X and inside the company the Macau arm is worth Z

But if its spun off its worth Z*1.30 then they've "unleashed" 30% extra value if you will.

Same decision that happens every day when a private company decides to go public or not. They dont lose full ownership.


On Nov 10 10:34 AM HarryHope wrote:

> I must be missing something. If LVS raises money through its Macao
> IPO, isn't it effectively selling a part of it's Macau operations?
> How does that really make LVS stronger? It would seem it enables
> LVS to avoid a problem with its debt but at a cost of divesting itself
> of a valuable asset.

2009 Nov 10 10:56 AM

[OUrollson]

LVS couldn't manage their way out of paper bag. I have been short this stock over and over and they never disappoint on BAD earnings. Them raising money should be against the law.

2009 Nov 10 01:32 PM

[JoeWoz]

I thnk you must have lost some money along the way with LVS since I have made six digit profits since their lowly price in early 2009.
Perhaps you should pick another stock if you are looking to short.


On Nov 10 01:32 PM OUrollson wrote:

> LVS couldn't manage their way out of paper bag. I have been short
> this stock over and over and they never disappoint on BAD earnings.
> Them raising money should be against the law.

2009 Nov 11 10:24 AM