Entries by Ken Liu

Questions about the Audited Financial Statements of Red Rock Resorts

Did Fertitta Entertainment provide audited financial statements with an unqualified opinion by its auditor after it agreed to be acquired by Red Rock? If it did not provide audited financial statements, how did Red Rock’s auditor handle the inclusion of Fertitta Entertainment when it produced the audited consolidated financial statements of the Station Holdco holding company?

Why is Station Casinos Selling Valuable Casino Sites?

Investors should ask Red Rock Resorts/Station Casinos and its IPO underwriters: Why is the company selling valuable casino sites? Where will growth come from if the company is selling off future casino sites? Do the Fertittas and other executives of Red Rock have confidence in the company’s core Las Vegas locals business?


We sent a letter to Nevada Governor Brian Sandoval regarding the Station Casinos/Red Rock Resorts IPO to provide the governor with “specific examples of problems related to the approval of the Station Casinos/Red Rock Resorts IPO by the Nevada Gaming Commission on January 21, 2016 in order to illustrate the challenges Nevada faces in regulating a ‘too-big-to-regulate’ significant owner of one of the major gaming companies in Las Vegas.”

The $460-Million Fertitta Entertainment “Internalization Fee”

The $460-million Fertitta Entertainment internalization fee is much higher compared to historical REIT internalization fee figures from a Sept. 2014 Duff & Phelps study. Some REITs have internalized external managers with no fee. The non-insider cost for acquiring Fertitta Entertainment should be closer to $50 million, not $460 million, based on termination provisions in the casino management agreements

An Update on Station Casinos Valuation, as Implied by Fidelity Filings

On January 28, the same Fidelity fund filed a new quarterly report and presented the values of its holdings as of November 30. The value of its Station Casinos stake dropped by over 5%. The implied valuation of Station Casinos would have thus dropped to $1.06 billion at the end of November.

The IPO Is Postponed, Per Deutsche Bank

Deutsche Bank announced last Thursday that the Station Casinos (Red Rock Resorts) IPO had been postponed. Will the Fertitta family and other insiders seek other ways to fund the $460-million Fertitta Entertainment deal even before the IPO goes to market? Will the terms of the IPO be modified?

The Tax Receivable Agreement of the Red Rock Resorts IPO

The IPO’s tax receivable agreement requires Red Rock to pay out a substantial (and potentially unlimited) amount of cash to the pre-IPO owners for years after the IPO. TRA payments will not be subject to the approval of outside investors, can negatively affect free cash flow (not EBITDA) and Class A stockholders’ equity, and will be in addition to quarterly tax distributions payable to the pre-IPO owners.

The IPO and the Fertitta Entertainment Airplane

According to Red Rock Resorts, Inc.’s Jan. 14, 2016, S-1/A filing, “an airplane will be transferred by Fertitta Entertainment to one or more of its members or their affiliates prior to the consummation of the Fertitta Entertainment Acquisition.” No further details about this transfer are disclosed in the company’s IPO filings.