Hookup Alert - Caesars Entertainment (CZR) + El Dorado Resorts (ERI)

If at first you don't succeed (first you don't succeed),
Dust yourself off, and try again
You can dust it off and try again, try again

Artist: Aaliyah

Song: Try Again

Rest in Peace to the Great Aaliyah. Gone to soon but your music lives on in our hearts.  So I gave you a story about another one of my good friend’s Tilman Fertitta, who is the owner of the Houston Rockets, The Golden Nugget, and Landry’s Restaurant chains, etc. I saw him on TV the other day still sounding a little cautious, however; with things re-opening I’m sure his worst case fears are dissipating. See here for my risk breakdown of how Tilman danced with debt and got very lucky: https://urbanomics.blogspot.com/2020/03/a-house-of-cards-pt-2-debt-gift-curse.html

Cue the music: a billi a billi --- he’s an old money billionaire, so there's a few things to learn. Thanks Lil Wayne I’ll take it from here. I wanted to highlight a trade my buddy Tilman brought to my attention a little less than two years ago. It’s no secret I like diamonds in the rough and Caesars Entertainment (yeah home to Caesars Palace in Las Vegas) was one of those gems I started looking at a few years ago. An iconic venue in Las Vegas, Caesars (CZR) is known worldwide and I’ve partied many a times there myself. But Caesars  over the years had taken on a lot of debt and hadn’t really done much.  So when Tilman and his Golden Nugget company made a play for Caesars I decided then was the time to strike.  This is a quick lesson for those just starting out in investing. Look for investments within your life that give you OPTIONALITY. Does it have a good MOAT --  that wide body of water surrounding castles like in Game of Thrones were there for a reason…to keep would be attackers at bay. Caesars brand is like that MOAT -- an iconic branded designed to keep people coming back to their properties. While I like good management, I like the right price even more. I followed CZR as it dropped into the $5-7 dollar range back in 2018 and apparently I wasn’t the only one watching. Pretty soon my boy Tilman and his Golden Nugget company were trying to slide into CZR’s DM. The stock shot up and I decided to pick some shares up as I was a little bit late to the party but believed it had more room to run up. After eight months of Golden Nugget trying to hook up, CZR ghosted on them.

My next lesson is stay clear headed. I got nervous and sold my position which ended in a loss. I should have stayed the course but I took the loss. Likely a result of listening to NOISE --- like being inundated with posts on Facebook and one of the reasons I don’t logon to the platform much. If you listen to NOISE you tend to move with the herd…and I am no sheep. I prefer going against the grain. Sheep will tell you to be patient for change when you clearly see systemic issues right in front of your eyes. I’m not having any of that.

But I am human; I panicked and sold my position for a loss. See below, the “L” I took back in 2018:

The nice thing about investing is it’s just you and a market of 10K+ stocks. If you’re right, you had the guts to make the call. If you’re wrong…it’s on you. All people want in life is a fair shot…the game not to be rigged…the knee taken off of our necks.  My "I told you so moment" was just 3 months later when rumor had it Caesars was now flirting with Eldorado Resorts (ERI).  Not happy about the “L” I took just a few months ago I felt a bit vindicated in CZR as an investment. I jumped back in as the two confirmed they were hooking up. My position was in the GREEN and I was on to the next trade. My 2019 positions for CZR:

Then COVID-19 happened and I watched the closure of casinos and gathering spaces to halt the spread of the virus. CZR cratered and fell as low as $3.52 on March 18^th. I held strong this time…not following the herd…knowing CZR’s worth (in the stock market we call this intrinsic value). That’s what makes some of us different. I know my worth, which then helps me evaluate the worth of everything in life. CZR intrinsic value is iconic, trust I have the pictures to prove it.

My last lesson - do your own deals…own your own masters. It helps to be good in math but stop giving your dough to someone else if you can’t quantify that value they are bringing to the table. It’s not personal, it’s your independence and I treat it as such.

As you see above, I even opened a new stake in CZR yesterday because I have conviction the deal gets done. I’ve already been sent the follow merger terms to review and on May 12th things became clearer as Eldorado Resorts provided a timeline to close the $17.3 Billion acquisition of CZR that's not too far off. There are approvals pending from the states of Indiana, New Jersey and Nevada and then it will be sent to the Federal Trade Commission. The math is this: ERI is paying Caesars shareholders the sum of $8.40 plus an amount equal to $0.003333 (the “Ticking Fee”) for each day from March 25, 2020 until the closing date of the Merger (the “Closing Date”), multiplied by (ii) a number of shares of Caesars common stock (the “Aggregate Caesars Share Amount”) equal to (A) 682,161,838 plus (B) the number of shares of Caesars common stock issued after June 24, 2019 and prior to the Effective Time pursuant to the exercise of certain equity awards issued under Caesars stock plans or conversion of Caesars’ outstanding convertible notes (the “Aggregate Cash Amount”). Subject to the proration procedures set forth in the Merger Agreement.

The Truth is all that legal language above don’t mean much. Keep Life Simple, Treat People Fair:

At $8.40 a share in cash plus shares in the new company, I break it down like this:

-             If you bought below $8.40 à You’re getting all your cash back, some profits, and shares in a New Company ERI ( a free roll as my       gamblers call it)

-           If you bought above $8.40 below $10 à I’m no gambler but any returns on your investment 80% and above is close to a playing with the house’s money. If you add in the free shares you’re receiving in the new company that = getting Optionality (most of my money back to move on to new investment plus free shares in a new company

I started this blog many years ago because I’ve witnessed system racism all my life. Early on I knew I needed an exit plan because Corporate America wasn’t thinking about diversifying its ranks. No mentors, I was one of the fastest rising African American’s to make the senior management ranks because I worked harder and longer than most. I could probably count the number of African American director’s at my company (which is the next level) on 2 hands in a company that boasts over 15K people so I knew that glass ceiling was real. I look forward to change but until these institutions are dismantled you’ll see me here diversifying myself for those moments when someone brings terms to me that aren’t equitable for me or my family…I always have the OPTIONALITY to say no. Sadly there is no strategy for racism, bad policing, and hate. I only know to do what my late African father taught me to do. Know My History, Know Where I’ve Come From, Treat Others with Respect, and to be the King I was meant to be…all while still not taking shit from anyone. I put love out into the world and expect it back. That’s all I ask for. 

Peace and Love ✌

Full Disclosure: I am long CZR option contracts. Fancy BS for I think the stock will go up