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Caesar’s IPO Might Not Be a Good Bet, Pros Say

Tuesday, 7 Feb 2012 | 6:53 PM ET

Casino operator Caesar’s Entertainment, which holds its IPO on Wednesday, might not be a good bet for everyone, one analyst said.

“They’re basically just dipping their toe into the equity market water right now just to get this done,” David Bain, a managing director at Sterne Agee, said on “Fast Money.”

Bain said the initial public offering sets the stage for multiple rounds of financing or shares being sold by current shareholders.

Is Caesar's IPO a Bad Bet?
David Bain, Sterne Agee gaming analyst, provides insight on Caesar's initial public offering, warning investors to avoid it unless they expect a huge economic turnaround, with the Fast Money traders.

Investors include John Paulson’s hedge fund, Goldman Sachs and Deutsche Bank who hold may sell a combined 34.7 million shares after the offering, according to the IPO prospectus.

But should new investors buy in?

“We don’t think so unless you assume the domestic economy is going to come roaring back,” Bain said.

Caesar’s Entertainment, which will sell stock at $9 per share under ticker symbol CZR, has a valuation range similar to Wynn Resorts, Las Vegas Sands and MGM Resorts, he added.

But Caesar’s has $20 billion in debt and significant to Atlantic City, N.J., which has been a laggard in the U.S. economy.

Bain expected casino companies with exposures to Macau to trade at higher multiples than those without, such as Caesar’s.

His top picks in the sector are Melco Crown Entertainment, which is a pure Macau play, and Las Vegas Sands, which is a Macau and Singapore growth play.

Tim Seymour of EmergingMoney.com wasn’t a buyer, partly on valuation concerns.

“With this amount of stock that’s out there, I don’t think you’ve really set a benchmark,” he said.


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Trader disclosure: On Feb. 7, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Seymour is long AAPL; Seymour is long BAC; Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU

For Tony Wible
Janney Montgomery Scott is a market maker in the securities of DIS, and may at any time hold a long or short position in this security.

Janney Montgomery Scott may seek compensation for investment banking services from the subject company (ies) DIS security in the next 3 months.

The research analyst is compensated based on, in part, Janney Montgomery Scott's profitability, which includes its investment banking revenues.

For Greg Zuckerman
No disclosures

For David Bain
Stern Agee & Leach makes a market in the shares of (LVS), (MGM), (MPEL), WYNN)

For Anthony Young
(ALCOA) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer

(CLF) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer

(CENX) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose & Company, LLC makes a market in the securities of Century Aluminum Co.

(X) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer.

(BHP) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer.

(NUE) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer.

(FCX) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer.

(AKS) Dahlman Rose & Company, LLC has not provided investment banking services to the subject company in the past 12 months. It intends to seek to be a financial advisor or to engage in investment banking services with the subject company and may receive compensation for such services during the three months following publication of this report. As a result, investors should be aware that the firm might have a conflict of interest in the future that could affect the objectivity of this report. I have never personally received any compensation from this company and do not own their securities. Dahlman Rose does not make a market with this issuer.

For Deborah Weinswig
An employee of Citigroup Global Markets or its affiliates is a trustee of Target Corp.

Gregory Hertz, CFA, CPA, Associate, holds a long position in the securities of Wal-Mart Stores Inc.

Leo Kulp, CFA, Analyst, holds a long position in the securities of Wal-Mart Stores Inc.

Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of JC Penney Co Inc. This position reflects information available as of the prior business day.

Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Dollar General Corp., Kroger Co, Target Corp, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Dollar General Corp., Kroger Co, Macys Inc, Target Corp, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from CVS Caremark Corp, Dollar General Corp., JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp in the past 12 months.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Dollar General Corp., Kroger Co, Macys Inc, Target Corp, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: CVS Caremark Corp, Dollar General Corp., JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, Saks Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: CVS Caremark Corp, Dollar General Corp., JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp.

Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Dollar General Corp..

Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.

The Firm is a market maker in the publicly traded equity securities of CVS Caremark Corp, Macys Inc, Costco Wholesale Corp.

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