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Deutsche Bank Would Have Valued Red Rock at $5.39 Per Share a Year Ago

According to a 2/17/15 Deutsche Bank analyst report, Station Casinos LLC, as of 12/31/2014, was estimated to have an enterprise value to be $2.59 billion with an implied an equity valuation of $624.6 million. Investors should ask Deutsche Bank how, in its opinion, the value of Station Casinos could have more than tripled in little over a year.

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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

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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.

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How much is Station Casinos worth?

Last week, news broke that Fidelity, the mutual fund giant, had lowered its valuation of Snapchat Inc., the video messaging app company, by 25%. The story got us thinking about how much Fidelity values Station Casinos LLC, of which it owns 8.7%. Fidelity’s valuation would provide a useful baseline for prospective investors in the Station Casinos IPO.

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