For immediate release
October 18, 2016
LAS VEGAS—Deutsche Bank will soon be able to dispose of its 17% ownership of Red Rock Resorts (NASDAQ: RRR), when the Las Vegas gaming company’s IPO lock-up period expires on October 24, according to UNITE HERE Gaming Research.
“Deutsche Bank is in dire need of additional capital, so we expect them to sell off their Las Vegas casino stake as soon as they can on or after October 24,” said Ken Liu, an analyst with UNITE HERE Gaming Research. “Deutsche Bank investors should certainly welcome the cash infusion and capital boost that can come from selling and exiting the casino assets.”
Deutsche Bank is in the process of selling other non-core assets such as Abbey Life and its stake in China’s Hua Xia Bank. CEO John Cryan noted in July that the lender’s second-quarter revenues “benefited from the IPO of Red Rock Resorts.”
UNITE HERE estimates the German bank’s Las Vegas casino stake to be worth approximately $440 million. (The bank has not disclosed the specific number of Red Rock shares it beneficially owns.) In addition, according to the tax receivable agreement Red Rock signed as part of its IPO, the company is required to pay Deutsche Bank and other pre-IPO owners 85% of certain tax benefits to be realize when Deutsche Bank and other pre-IPO owners sell their ownership interests. The TRA payments will need to be made in cash before the company makes its dividend payments. As of June 30, the company’s TRA liability was $44.5 million.
As Deutsche Bank gaming analysts observed on May 22: “[I]t is worth noting that at present, ~21% of the shares outstanding are held by legacy strategic investors, whose core business does not include owning gaming equities. Thus, post the 180 day, from IPO, lock up expiration, we believe the risk of secondary issuances could potentially weigh on shares.”
UNITE HERE represents workers in gaming, hotel, and food service industries in North America and provides analysis from the perspective of those who work in these industries.