Caesars Stock Dives After N.J. Rejects Plan
The value of Caesars World Inc. stock plunged 15% Thursday after the company’s recapitalization plan was rejected by New Jersey gaming officials on grounds that it would burden the company with excessive debt.
New Jersey regulators announced their decision after the market closed Wednesday, and trading in Caesars’ stock was suspended for most of Thursday. When trading resumed in the afternoon, the stock dropped $5.25 to $29.875 a share as about 1 million shares changed hands.
The drop in price had been expected because of uncertainty surrounding the situation.
Meanwhile, Caesars executives in Los Angeles huddled with investment bankers and lawyers to map out a new strategy.
Exploring Options
Caesars adopted the recapitalization plan to ward off a hostile takeover bid by New York money manager Martin T. Sosnoff. The plan calls for stockholders to revive a special dividend of $26.25 per share, plus retain stock in the reconstituted company.
Caesars gave few clues about its new strategy, except to indicate that it must decide within 10 days whether to seek a rehearing by gaming officials or appeal the regulatory decision to New Jersey appellate courts within 45 days.
The lopsided 4-to-1 vote by the New Jersey Gaming Control Commission on Wednesday and the tone of commissioners’ comments made it clear that Caesars would have difficulty succeeding in a rehearing.
Caesars said it was reviewing all options, and it was speculated by industry observers that the company was working to come up with a revised recapitalization plan that would give similar value to shareholders and meet regulatory objections.
Grounds for Action
Last month, Caesars’ stockholders approved the recapitalization, and the company received preliminary approval from Nevada regulators. A final decision by the Nevada Gaming Commission is scheduled to be made next Thursday.
However, Caesars needs approval by both New Jersey and Nevada officials as long as it retains gambling operations in both states.
Caesars spokesman Jack Leone declined to comment Thursday on whether the company was considering selling its Atlantic City operation so it would no longer need New Jersey approval.
