Caesars: A private equity gamble in Vegas gone wrong

http://fortune.com/2015/06/05/caesars-losing-las-vegas/

by doppp • 11 years ago

32 16 11 years ago

zorrb• 11 years ago

I hate Harrahs/Caeser's Entertainment. Where do I even begin.

Some interesting anecdotes:

The CEO Gary Loveman bought ~2.4% stake of NBA basketball team Boston Celtics in 2008. No Harrahs properties can take NBA bets on games involving Celtics or futures bets on who will win championship (Celtics could win) because CEO wants an inconsequential stake in an NBA team. How vain can you be?

Past couple months CEO and friends have been trying to split CET into two separate companies. One with all the valuable properties (Caesar's Vegas, etc.) the other with the stinkers (Atlantic City, etc.) bundled with debt and pension obligations. Trying to screw over all the workers. Judge recently ruled they couldn't do this, but they're still trying.

CET had option to build property on Kotai strip in Macau. CEO said it was too risky, so let it expire. The majority of profits of Las Vegas Sands (Sheldon Adelson) and Wynn Resorts Limited (Steve Wynn) comes from properties they built in Macau.

fennecfoxen2• 11 years ago

Where do I even begin.

I was thinking of beginning with the fact that they're in the gambling business, myself, and that humanity as a whole would be better without a bunch of people systematically studying how to subvert the human brain by abusing deficiencies in its risk-reward computation mechanisms to extract as much money as possible from what might otherwise be the productive economy... wholly ruining a variety of lives in the process (and encouraging others to reject long-term thinking, self-control, and related virtues which frequently help a human being to prosper.)

But sure. I guess their inadequate gambling services around Celtics basketball must annoy some people too.

At least they're not the state lottery. :b

hueving• 11 years ago

Your view on gambling is predicated on the assumption that people gamble under the assumption they can make money in the long run. Many people enjoy gambling knowing fully that the expected value of the process is negative.

Once you understand that people choose to gamble knowing that it causes losses, your entire argument against it falls apart unless you are willing to take it to its full conclusion and blast every entertainment industry in existence.

curiously• 11 years ago

here's the thing. if you get rid of casinos, people are going to go underground.

whenever you ban or make certain activity or good illegal, you create a massive underground economy very quickly, and you can't extract tax revenues and end up spending money on the problems that arise as a result of having an underground economy.

Much rather have cocktail waitresses and air conditioned halls with security guards than sneak through a seedy Chinatown restaurant with false doors and scary looking guys.

j_s• 11 years ago

to subvert the human brain by abusing deficiencies in its risk-reward computation mechanisms to extract as much money as possible

Ah, like everyone creating endless in-app purchases? :)

mistermann2• 11 years ago

It's stories like this that reinforce my belief that banking should be treated like a utility, and everyone operating within that sphere should be kept on a very short leash.

IBM• 11 years ago

This has nothing to do with banking.

jeffsco• 11 years ago

From the article:

    By the time the deal was about to close, Loveman
    remembers that it was “a bit uncertain” as to whether
    every bank would honor its commitment. But they did.

mistermann2• 11 years ago

Gambling with other people's money, sounds rather similar to the carnival ride the entire planet went through in 2008.

caminante2• 11 years ago

I can't picture...how would that work?

ryanobjc• 11 years ago

The thing that stuck out to me the most when I was reading this was the notion of 'anti-fragility' -- the business structures resulting from the leveraged buy out apparently could not handle the shocks of 2008.

The question is, does the architects of LBOs and mergers and business like this have any duty to build more buffer and ability to withstand unpredictable futures? Of course, when faced with a $550m -> $100m decline in their Atlantic City revenues, that is a huge shift in the industry. But still, even as Las Vegas recovers, so too has Caesers hasn't! Too much legacy baggage.

So back to my central thesis, what kind of responsibility do corporate masters have to build anti-fragile and reliable companies? One interesting thing here is the lack of stakeholder lawsuits quotes in the article (although apparently there were some, as a different commenter noted).

In the end, the legal arena is where these matters of 'morality' (in-so-far as it exists in a legal sense for this area) play out and are decided. The only downside is it takes a long time, and costs a lot of money. Not sure if there is any advantages to moving this kind of adjudication farther into regulatory or government divisions. I guess the Nevada Gaming Commission get it's say for the ethics of running the operation.

caminante2• 11 years ago

I found the court costs eye-popping.

Knowing next to nothing about bankruptcy court (or any court ;-)), it was interesting to learn about the availability of court-appointed examiners, but man...the costs are extraordinary (i.e. CAE's in the [much larger] Lehman case cost ~$50M/year).

markbnj• 11 years ago

Boy oh boy did Rowan and his crew ever stick it to the hedgies. That's an amazing tale. If they get away with it this will be a truly legendary outcome in the financial world. Of course, as interesting as it might be to watch these masters of the universe playing their games and trying to screw each other, it's worth remembering all the folks at the other end of the pyramid they're perched on.

Caesars: A private equity gamble in Vegas gone wrong

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