In 2020, Golden Nugget had quite an eventful financial year and it looks like 2021 will be no different. Last year in December, shareholders were scheduled to vote on whether Landcadia Holdings II, a special purpose acquisition company, would acquire Golden Nugget Online Gaming. However, the vote was rescheduled.
Now, Golden Nugget’s plan to go public this year may be facing some opposition from Wall Street. That’s because Golden Nugget has a whopping $4 billion debt and its retail branch is not performing well as a result of 2019’s contagion. Despite the pushback, billionaire and owner of Golden Nugget Tilman Fertitta is still determined to list a minority stake of GNOG on a public stock exchange.
Apart from being in charge of the Golden Nugget franchise, Fertitta also runs various casual restaurants and eateries that consist of the Bubba Gump Shrimp, the Del Frisco’s steakhouse chains, Landry’s Seafood, Morton’s The Steakhouse, and McCormick & Schmick’s.
Last year, when Landcadia Holdings signed its groundbreaking merger agreement with Golden Nugget Online as we’ve discussed here, Landcadia Holdings stock saw an upswing. Why? That’s because Golden Nugget Online Gaming became only the second pure publicly traded online casino company in the country. the only other one is DraftKings, which has similarly enjoyed success in the stock market.
Even though it has already proven itself, the Golden Nugget IPO hasn’t been able to keep the momentum going. It even seems to be getting the cold shoulder from investors, which might result in a dip. The Golden Nugget is not a brand that needs no introductions as we’ve covered here. It is one of the most recognizable names in gaming not just in New Jersey, but the rest of the world.
The Golden Nugget online has managed to grow in the pandemic, while brick and mortar casinos continue to languish under the weight of restrictions and social distancing guidelines. The online gambling industry in New Jersey has managed to maintain a steady course because many New Jersey gamblers still prefer to gamble online in the comfort of their homes where it’s safe.
The Golden Nugget has been sitting pretty at the top of the online gambling revenue table despite Borgata’s efforts to overtake it. With the biggest online casino in the Garden State, it recorded over $289.4 million in revenue last year. Golden Nugget is expected to continue its stellar performance in 2021 as well.
So what’s holding the Golden Nugget IPO back?
Even the Golden Nugget IPO seems like an obvious choice for investors, investors don’t seem too keen on it and it is easy to understand why. As mentioned above, Fertitta runs a mega empire that consists of a series of popular restaurants as well as the casino gaming branch of the business. And even though the online casinos are a sure bet, that doesn’t seem to be the case for the restaurants included in the Golden Nugget IPO.
Even before news of the pandemic struck, the restaurants were already struggling. Things only worsened when the infection cases skyrocketed and the world was forced to come to a standstill. So as things are, the only valuable asset that the Golden Nugget IPO has at the moment is the online casino itself which is expected to keep performing well even as the vaccine makes its way to the population.
Golden Nugget’s colossal $4 billion debt also hasn’t been helping things in the slightest. The debt, most of which was acquired in 2017 to finance Fertitta’s acquisition of the Houston Rockets, is devaluing the Golden Nugget IPO despite its huge potential to grow.
Golden Nugget may be the revenue king of the New Jersey gambling market but upon closer inspection, there appears to be little value in the brand, and here is why: Golden Nugget generates approximately $400 million in Ebitda, which a financial metric referring to earnings before interest, taxes, depreciation, and amortization. Even though $400 in revenue seems like a great number, it’s still too low to cover the brand’s enormous $4 billion debt.
That means that any stockholders that choose to invest in the Golden Nugget IPO would get little value for their troubles. So for now, Fertitta’s plans to take Golden Nugget’s online gaming business public will have to wait just a little longer.
Apart from this worrying debt, there are other concerns as well. One of them is Fertitta’s publicly traded food delivery business, Waitr, which has been underperforming ever since the billionaire purchased it in 2018 for $308 million. Waitr seemed like a great investment at the time. However, it’s been crushed by other more popular food delivery businesses that have come up since then including DoorDash and Postmates.
To add to the miseries discussed above, the Rockets, like many other sports teams, are also struggling during the pandemic. Even though live sports have since returned, ticket sales are nowhere what they used to be pre-pandemic. Things have gotten so bad for the Rockets that Fertitta has reportedly considered reducing the team’s payroll in a bid to survive the pandemic.
News of Golden Nugget Casino Online Gaming completing a merger with Lancadia Holdings II late last year was very well received. With Golden Nugget being one of the most profitable businesses in the New Jersey gambling market, many analysts predicted that it would be the stock to follow.
However, instead of shooting through the roof, the GNOG stock hasn’t been performing as well as predicted, which has caused investors to worry. Golden Nugget is already an established company that consists of 5 brick and mortar casinos, 3 hotels, 2 amusement parks, 6oo outlets, and 4 aquariums. With GNOG’s expanding further into online gambling, the brand’s future looks bright. But first, it has to get its debt in control.
The good news is that the vaccine that’s currently being distributed will help to make things better. So when the number of infection cases finally starts to drop and the contagion is squashed, the GNOG IPO should see some better days.
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