The Fertitta brothers, owners of the company behind Station Casinos, just wrapped up a shopping spree that saw them purchase 2,248,700 shares of that company, Red Rock Resorts. The revelation was made through filings with the US Securities and Exchange Commission (SEC) that show how Lorenzo and Frank III have taken advantage of a significant drop in the company’s share price to increase their stake. They now own just over 41% of the company after shelling out $41.75 million between August 8 and August 16.
NASDAQ-traded Red Rock has seen its stock price drop from $21.57 on July 30 to $17.56 on August 7. This followed an even larger decline that began with a price of $32.09 in August of last year. The brothers completed their purchases just as the price began to increase and reach the $19.42-mark, where it currently sits. Timing is everything when playing the stock market.
Over the past 12 months, the company’s stock has dropped 40%, partly as a result of Red Rock’s decision to revamp Palms Casino Resort. The Fertitta brothers purchased the casino a couple of years ago for $312.5 million before deciding to spend another $690 million on upgrades, making for a combined investment of just over $1 billion. That’s a lot of money for a casino that isn’t exactly in a high-traffic area of Las Vegas.
Carlo Santarelli of Deutsche Bank believes that the Fertitta investment is a sign of confidence in the future of the Palms venue. The analyst said this week, “We view the activity as a distinct positive, further supporting the view that management believes the locals market remains, and will remain, healthy, and that the Palms redevelopment will find its footing over time.”
More likely, however, is the possibility that the Fertitta brothers decided to take advantage of the downturn to increase their holdings in anticipation of a greater recovery for the casino industry as a whole, or in anticipation of something else coming to Las Vegas. There have been rumors that the Rio casino is going to be razed to make way for an MLB stadium, which could ultimately prove beneficial to the brothers due to the proximity of the Rio to the Palms.
The chances of the Fertitta brothers having gamed the system to increase their positions isn’t outside the realm of possibility. They have been called out for allegedly not playing by SEC rules in the past and are also reportedly behind the previous bankruptcy of Station that allowed them to purchase the company back for much less money. The brothers, cousins to Golden Nuggets owner Tilman Fertitta, are also accused of not respecting laws related to employees’ rights to unionize.
