Landry's Tilman Fertitta considering an IPO

This is a month old, but Tilman Fertitta is looking to sell off part of the Casino and Restaurant business in an initial public offering according to a CNBC article.

The article also mentions that he is taking Golden Nugget Online Gaming company public.

 

What Tillman is doing is the same as what Riklis of Riv Casino fame did who pioneered the technique and it is taught as a business technique in university. You can see a similar technique in selling casinos to the REITs. Assets that have a positive cash flow are sold to the new company usually providing operating capital to the debt ridden initial company. This allows a positive cash flow to be created at the new company making it stronger. It opens up lines of credit etc to the new company not available to the old based on the positive cash flow. In the long run the Bottom line of the initial company is reduced due to removal of generating assets. The choice usually is for the stronger to buy the weaker or to sell off the remaining assets of the original company or to file for bankruptcy in the initial company resulting in a sale of assets or a stronger less debt ridden company. All of the options discharge crippling debt and keep people employed. It’s a smart move for Tillman.

 

Not surprising with how he's ripping apart the Houston Rockets to save money.

 

I read an article that said he pulled $1.7 Billion out of his company to buy the Rockets for $2.2 B.

Basketball, Casinos, and Restaurants......I guess the good news is that he doesn’t own an airline.

 

I don't understand why you would purchase a business and immediately start cutting costs as if you don't have enough money to run it regularly (and competitively). He could have found a partner to invest in the team and be under a lot less financial obligation.

 

Covid-19 caught everyone by surprise, I don’t think any business owner could have planned for this pandemic. He looked around for other financing, but I’m sure lenders wanted terms that were not favorable, so he is looking to sell off 49% of his casino and restaurant business.

Of course the business is coming back in 2022 according to Tillman, his fish is fresh!

 

No reasonable business can go a year with such reduced capacity without having some money issues. Their money is tied up and not accessible easily. At the time of purchase the Rockets an apparent childhood dream of his it made sense as an investment and would likely have paid off had it not been for the interruption. You can shut a business and not pay salaries but you owe the rent still to keep the location and things like electricity and other fixed expenses. Those that remained open are what is keeping the others afloat but it’s not nearly the usual business one gets. A big expenditure would be debt maintenance. He has loans out there that still have to be paid. The Rockets would likely represent only one of such loans.
I don’t believe anyone would have realized how long this would go on and there is no answers to how long it will continue as even when over it will take time to recover as with other economic downturns in the past.. It will eventually return to normal and a business has to outlast it or close and recreate down the road. Closing would not pay his debt maintenance. This represents a way to survive. It buys him time. It buys him options should things not go the way he plans by separating the assets. Tillman has always been a very smart businessman.

 

https://nypost.com/2021/02/01/golden-nugget-casinos-to-go-public-through-spac-merger/amp/

 

Tilman wants additional cash for bottom fishing on distressed businesses. Buying low and selling high makes investors wealthy.

As individual investors it is always a good strategy as well for part of your stock portfolio. Rich guys think much bigger.

 

There seems to be a lot of these SPAC acquisitions lately, and from a speed standpoint, these deals get done much faster than a traditional IPO. I’m just wondering when some of these SPAC’s go south, will there be investors willing to pony up the cash? Good article in Bloomberg

 

investing with tilman is not good for one's portfolio

he does like "distressed properties" but his MO is to ratchet them up with high debt at high rates and drive the stock price down and barely scratch things out cash flow wise and then get some insider bankers to come in with a financing package for him to take the company private with a "higher stock price offering" that is well below where the stock was before it was run down with debt

part of the reason he was interested in the Golden Nugget Casinos was because doing that deal and adding it to his restaurant holdings made a situation where those that placed valuations and did analysis of the stock would not give full value to the casinos or the restaurants because of the dissimilar nature of the two businesses

thus taking on a lot of debt to buy casinos in a down market drove down the value of the restaurant business because of the combination of the two and the additional debt service mostly to be on the backs of the restaurants as well

there were also some lawsuits related to a stock purchase (taking the company private) with a cancellation fee that was amended based on the 2008 hurricane that hit Texas and then even when the amended buyout offer was not completed the associated (reduced) cancellation fee was still not paid and a Louisiana public employees pension fund sued