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Red Rock Resorts is a Second-Class Gaming IPO

Investors who buy Red Rock’s second-class shares on offer will gain a minority (33%) stake in the once-bankrupt Las Vegas casino and tavern operator, Station Casinos. The terms of the offering beg questions about company insiders’ confidence in its long-term prospects. Prospective investors should ask management the following questions

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Selling Growth While Cashing Out

As one gaming analyst recently said about the Red Rock Resorts IPO, “there is going to be an appetite for them to grow.” However, economic conditions in Las Vegas and little revenue growth by Red Rock suggest hungry investors might not find the company very appetizing, especially as they see company insiders planning to take out a substantial amount of cash concurrent with the IPO.

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What is the Red Rock Resorts IPO?

As currently proposed, the Red Rock Resorts IPO will result in the Fertitta family taking substantial sums from the company, retaining control for the long term through super voting rights, and shifting risks in its current structure to new public investors. The complicated IPO thus presents prospective investors with an unappealing proposition.

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Our Response to SEC Request for Comment on the Effectiveness of Financial Disclosures about Entities Other than the Registrant

We ask the Commission to consider three specific amendments to Rule 3-05. We have arrived at our suggestions after reviewing recent filings by Station Casinos LLC and Station Casinos Corp. We think investors would find it difficult to evaluate the proposed $460-million purchase price of Fertitta Entertainment LLC as neither registrant has provided historical financials of the target.

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