Fidelity Would Have Valued Station Casinos at $9.19 at the End of January

If Fidelity bond funds valued Station Casinos at an estimated $9.19 per share at the end of January, what will Fidelity equity funds value the company at if they decide to participate in the upcoming Red Rock Resorts IPO?

As a result of Station Casinos’ Chapter 11 bankruptcy reorganization in 2011, Fidelity owns approximately 8.7% economic interest in the gaming company in the form of Station Holdco LLC units held by several of its bond funds. These funds disclose the value of their Station Holdco holdings regularly.

Most recently, 22,418,968 Hold LLC units in the Fidelity Capital and Income Fund (FAGIX) were given a value of $78.018 million as of 1/31/16 in a 3/30/16 N-Q filing.

Using the same methodology as before, we estimate that this implies a valuation of Station Casinos’ equity at approximately $1.06 billion, which would translate to about $9.19 per share based on the fully-diluted number of shares outstanding of Red Rock. That is, Fidelity would have valued Red Rock at $9.19 at the end of January.

What valuation will Fidelity give Red Rock if the mutual fund giant decides to participate in the IPO, which has an offering price range of $18 to $21 per share? Will Fidelity ask itself, internally, how Station Casinos could have doubled in value in less than three months?