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Caesars Entertainment IPO is risky

|Includes: Caesars Entertainment (CZR), LVS, MGM, WYNN
Nov 15wk IPO calendar

Caesars Entertainment (NASDAQ:CZR) $980mm IPO (see '"how many shares" below)
with a market cap of $5.4bb at the price range mid-point of $15.  Scheduled for Friday, November 19, 2010

CZR Valuation Metrics

CZR is risky at the price range mid-point of $16
Weak & compromised balance sheet
. $20 billion of debt
. Negative tangible book value of $6.7bb, post-IPO
Weak Income statement -- for the nine months ended September 30, 2010
. Revenue decreased to $6.7bb from $6.8bb
. Profit dropped to -$634mm from a plus $532mm
. Interest charges of 22% of revenue crippled the income statement
Dividends not expected (weak balance sheet & income statement)

Expansion?  CZR wants to use IPO proceeds to expand, but there is significant over capacity in the gaming business, especially in Las Vegas.

31 million or 61 million?
On page 11 in the November 5, 2010 S-1 filing “Summary of the Terms of the Common Stock”
“Shares of common stock offered for resale by the Selling Stockholders in this offering:  30,243,126 shares" and
“Shares of common stock offered by Caesars in the IPO: 31,250,000 shares

On page 37 “Use of Proceeds” page 37
CZR says “We are registering these shares of common stock for resale by the selling stockholders in connection with the Private Placement. We will not receive any proceeds from the sale of the shares offered by this prospectus. The net proceeds from the sale of the shares offered by this prospectus will be received by the selling stockholders.”

On page 40 “Dilution”
“After giving effect to the receipt and our intended use of approximately $469.4 million of estimated net proceeds from our sale of 31,250,000 shares of common stock in the IPO at an assumed offering price of $16.00 per share”


from December 31, 2009 to November 10, 2010
. Las Vegas Sands (NYSE:LVS) increased to $50 from $15
. Wynn Resorts increased to $114 from $58
. MGM Resorts (NYSE:MGM) increased to $13 from $9, and MGM filed for bankruptcy November 3, 2010

. CZR is the world’s largest casino entertainment provider as measured by net revenues and individual casinos, and the most geographically diverse U.S. casino operator.
. As of September 30, 2010, owned, operated or managed, through various subsidiaries, 52 casinos in 12 U.S. states and seven countries.
. Vast majority of these casinos operate in the United States and England. Casino entertainment facilities operate primarily under the Caesars, Harrah’s and Horseshoe brand names in the United States, and include land-based casinos, casino clubs, riverboat or dockside casinos, casinos on Indian reservations, and casinos combined with a greyhound racing facility, a thoroughbred racetrack and a harness racetrack.

By Caesars 31mm, by selling shareholders 30mm .
100% to selling shareholders in connection with the Private Placement.  $469mm to CZR (see 'how many shares' above)
. To fund a near-term pipeline of growth projects and for general corporate purposes.
. These projects include the previously announced LINQ, a dining, entertainment and retail area located between the Imperial Palace and the Flamingo in Las Vegas; the completion of the Octavius tower fit out, a 660 room tower at the Caesars Palace Las Vegas property;
. CZR’s potential joint venture development in Ohio with Rock Gaming, LLC; and the Penn’s Landing development and management opportunity.
. CZR anticipates that these projects will require approximately $500 million of capital from CZR

CZR Valuation Metrics

Disclosure: none