Bally’s Reduces Shares Outstanding by 9.2 Percent in Dutch Auction

Posted on: July 26, 2022, 02:53h. 

Last updated on: July 26, 2022, 03:06h.

Bally’s (NYSE:BALY) reported results of its recently finalized Dutch auction, indicating the scheme meaningfully reduced the regional casino operator’s shares outstanding tally.

Bally's Dutch auction
Bally’s on the Atlantic City Boardwalk. The operator reduced its shares outstanding count by 9.2% in a recent Dutch auction. (Image: Play Pennsylvania)

Last month, the Rhode Island-based gaming company announced plans to repurchase up to $190 million worth of its outstanding equity. It will be done via the tender offer at prices ranging from $19.25 to $22. The period in which investors could tender shares closed last Friday.

Bally’s expects to accept for payment and purchase approximately 4,858,465 common shares at a purchase price of $22.00 per share, for an aggregate purchase price of $106,886,230, excluding fees and expenses relating to the tender offer,” according to a statement issued by the company. “These shares represent approximately 9.2% of Bally’s outstanding common shares.”

Dutch auction methodology is different than repurchasing shares on the open market. In a Dutch auction, the price of what’s being sold is determined by accounting for all bids to arrive at the highest price.

Bally’s Benefits From Dutch Auction

While the Dutch auction isn’t a share buyback program in the traditional sense of the term, Bally’s and its investors nonetheless benefit from the reduced number of shares outstanding.

Casino operators and equipment suppliers are showing commitment to buyback plans. Over the past 10 months, at least a dozen casino operators and gaming suppliers made share buyback announcements. Investors like share repurchase plans. That’s because, unlike dividends, shareholders pay no taxes when a company buys back its own stock.

Additionally, by reducing its number of shares outstanding, Bally’s can potentially boost its earnings per share (EPS). There’s flexibility. A company isn’t obligated to buy back the entire amount stated in a buyback or Dutch auction plan.

Hedge fund Standard General, which is Bally’s largest investor, participated in the Dutch auction, tendering 360,000 shares at prices ranging from $19.25 to $22.

Other Avenues for Shareholder Rewards

Like so many casino operators, Bally’s suspended its dividend during the early days of the coronavirus pandemic. But as the aforementioned share tender proves, the company maintains some level of commitment to shareholder rewards.

Over the near- to medium-term, that’s likely to include a focus on buybacks, as there’s no indication as to when the gaming operator will resume its quarterly payout. Plus, the company has dry powder with which to continue meaningfully paring its shares outstanding count.

“Bally’s may, in the future, decide to make share repurchases from time to time on the open market or in private transactions, subject to applicable law,” it said in the statement. “Any of these repurchases may be on the same terms or on terms that are more or less favorable to the selling shareholders in those transactions than the terms of the tender offer. Bally’s currently has $334.6 million available for use under its previously announced capital return program.”