Caesars Stock Slumps as Investors Fret About Lack of Takeover News

• Caesars stock dropped by almost 9% on a slow news day
• Some market participants are speculating it’s because of lack of updates regarding a takeover
• A discouraging inflation reading likely played a part, too

Caesars Entertainment (NASDAQ: CZR) shares tumbled on a slow news day as investors fretted over a lack of takeover updates from the casino operator.

On volume that was 23.1% above the daily average, shares of the Harrah’s operator closed lower by 8.5%, marking one of Tuesday’s worst showings across the gaming equity complex.

In some Wall Street circles, the stock’s Tuesday woes were blamed on lack of news on takeover discussions. That extends a period of “all quiet on the Western Front” and that lack of official commentary may be unnerving some investors.

It’s believed that Caesars and billionaire Tilman Fertitta are in talks and that the two sides recently extended a 45-day exclusive negotiating period that expired in early April.

The casino industry rumor mill indicates Fertitta has offered $32 or $34 a share for Caesars, but neither he nor the gaming company have confirmed that bid.

CPI May Have Been the Real Culprit

Released earlier today by the Bureau of Labor Statistics (BLS), the April reading of the Consumer Price Index (CPI) may well have played a hand in the Caesars stock sell-off.

The casino Goliath concluded the first quarter with $11.9 billion in debt. By some estimate, Caesars would save $60 million per year in interest expenses for every 100 basis points the Fed shaves off rates, but cuts of any nature appear unlikely this year.

Speaking of Caesars Debt…

Though not confirmed, there’s also chatter on Wall Street that consummation of a deal between Caesars and Fertitta may be slow-moving because of debt-related issues. It’s not just Caesars’ liabilities. Fertitta Entertainment Inc. carries its own debt and would reportedly need to raise another $4 billion to $5 billion in debt to finance a takeover of Caesars.

It’s certainly possible for the suitor to raise that capital, but it likely needs to come from multiple lenders and that may be part of the holdup in terms of a takeover announcement.

Bottom line: a Caesars/Fertitta marriage could still happen, but it might not be announced on a timeline that satisfies some nervous Caesars shareholders.