Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Lock-up Expiration Could Cause Red Rock Resorts Inc (RRR) Landslide

October 24, 2016 concludes the 180-day IPO lockup period on Red Rock Resorts Inc (NASDAQ:RRR). As described by the SEC, at this point, RRR’s pre-IPO shareholders, directors and executives will have the chance to sell previously restricted shares. The event could put downward pressure on the stock and open a short opportunity for aggressive investors.

We suggest selling or shorting RRR prior to the event to take full advantage of an impending decline.



Business Overview: Operator of Casino and Entertainment Properties

Formerly known as Station Casinos Corporation, Red Rock Resorts Inc (NASDAQ:RRR) owns, develops, operates and manages hotel, casino and gaming properties. These include Red Rock Casino, Green Valley Ranch, Sunset Station, Palace Station, Boulder Station, and others primarily in the Las Vegas, Nevada, area. The company also has gaming facilities in western Michigan and northern California.

Its portfolio includes 21 casino and entertainment properties, 19,300+ slot and video poker machines, 4,041 hotel rooms, 302 table games, 53 bars and lounges, 113 food and beverage venues, 96 movie screens, 26 live entertainment venues, and 282 bowling lanes.

During the second quarter of 2016, Red Rock Resorts announced that its subsidiary, Station Casinos LLC, entered into an agreement to acquire the Palms Casino Resort for a total of $312.5 million. The company announced the closing of the acquisition on October 3. In addition, RRR completed a $2.4 billion refinancing of the Station Casino credit line, which added a higher borrowing capacity, reduced borrowing costs and added additional financial flexibility.

Management Team Highlights

According to company filings, President Richard Haskins, Esq. has served as President of Red Rock Resorts and Station Holdco LLC since October 2015. He joined Station Casinos in 1995 and has held increasingly responsible positions during the last 18 years. Mr. Haskins is a member of the American Bar Association, the Missouri Bar Association, and the Nevada Bar Association.

CFO Marc Falcone has served in his position since November 2010. His previous experience comes from financial positions at Goldman Sachs, Magnetar Capital, Deutsche Bank Securities, and Bear Stearns & Co.

Competition: Wynn Resorts, Las Vegas Sands, MGM Resorts

Currently, approximately 40 major casino and gaming properties are located on or near the Las Vegas Strip. Red Rock Resorts Inc (NASDAQ:RRR) faces competition from both restricted and non-restricted sites, with restricted gaming casinos having 15 or fewer slot machines. The largest casino companies are Las Vegas Sands (NYSE:LVS), MGM Resorts (NYSE:MGM), Caesars Entertainment (NASDAQ:CZR), Wynn Resorts (NASDAQ:WYNN), Penn National Gaming (NASDAQ:PENN), Pinnacle Entertainment (NYSE:PNK), and Boyd Gaming (NYSE:BYD).

Despite being >10X smaller with regards to market cap than many of its public competitors, RRR has a P/E only slightly above that of LVS, MGM, and WYNN, and a P/S just below that of the industry average (2.1).

Strong Early Market Performance

Red Rock Resorts’ IPO priced at $19.50 per share, at the midpoint of its expected price range of $18 to $21. The stock closed on the first day of trading at $18.70. Since then, the stock climbed to reach a high on August 3 of $23.20. It declined from then to $20.80 on September 13. The stock currently trades around $23.31 (early sessions Oct. 6, 2016).

Major Insiders Hold Over 88M Restricted Shares

As noted above, RRR’s pre-IPO shareholders, directors and executives will have the chance to sell previously restricted shares, which number 88.6 million. This figure dwarfs the 27 million offered to the public at the company’s IPO.

Conclusion: A Smart Short

Our firm’s research specifically identifies a 4.2% drop (1) on average in a window of time, ideally (-11, 9) days surrounding the event day (0). This occurs particularly for firms, such as RRR, which have increased in price since their IPO and have a diverse set of insiders. If even some decide to sell, the oversupply could send RRR’s stock price tumbling down.

We suggest selling or shorting ahead of the event to take full advantage of impending declines.

Follow Red Rock Resorts Inc. (NASDAQ:RRR)
Trade (NASDAQ:RRR) Now!

Disclosure: I am/we are short RRR.

Note: This article is written by Don Dion. Visit his site at DRD Investments for expert analysis on current and upcoming IPOs.

Additional Links:


DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.