Investors should get short Red Rock Resorts Inc (NASDAQ:RRR) ahead of Lockup Expiration next Monday for a number of reasons I’ve mentioned here before and elsewhere: the large number of insider shareholders and the positive performance of the IPO.
Insiders hold a large portion of the approximate 115.9 million shares outstanding. RRR’s pre-IPO shareholders, directors and executives will have the chance to sell previously restricted shares, which number 88.6 million, when the lockup expires. This figure dwarfs the 27.35 million shares offered to the public at the company’s IPO. If even a small group of these insiders decide to sell shares, there could be a massive downward impact on share price.
And now there’s a very motivated seller – Deutsche Bank. The problem plagued banking institution owns a massive 17% of Red Rock Resorts Inc (NASDAQ:RRR) shares. The bank is desperate to raise capital and one easy way to do this would be to cash in their chips and take their gains from Red Rock Resorts Inc (NASDAQ:RRR)’s IPO success.
A press release from Business Wire today highlights many of these points and presents a compelling argument for why Deutsche might move quickly towards the exit.
The press release aptly points out Deutsche’s stake and urgent need for cash, quoting Ken Liu:
“Deutsche Bank is in dire need of additional capital, so we expect them to sell off their Las Vegas casino stake as soon as they can on or after October 24,” said Ken Liu, an analyst with UNITE HERE Gaming Research. “Deutsche Bank investors should certainly welcome the cash infusion and capital boost that can come from selling and exiting the casino assets.”
I continue to think that RRR is an attractive short and encourage investors to establish a short position now ahead of the lock-up expiration.
Disclosure: I am short shares of RRR.
Note: This article is written by Don Dion. Visit his site at DRD Investments for expert analysis on current and upcoming IPOs.