Carl Icahn Takes New Caesars Stake, Not Looking at Activism

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Shares of Caesars Entertainment (NASDAQ: CZR) surged Friday after it was revealed that Carl Icahn has built a large position in the gaming stock.

Activist investor Carl Icahn. He said he took a new stake in Caesars Entertainment. (Image: Chip East/Bloomberg via Getty)

In late trading, shares of the Harrah’s operator are up 11% on volume that’s more than five times the daily average after trading higher by as much as 18% on news of the Icahn stake. That puts the stock on pace for its best intraday showing in 18 months. News of Icahn initiating a new position in the casino arrived as the stock has shed nearly a quarter of its value this year.

I like Caesars and I own some stock, I would never do activism in Caesars,” Icahn reportedly said in an interview with CNBC’s Scott Wapner.

The exact size of Icahn’s position isn’t yet known. On the air, Wapner said he got the impression Icahn might be apt to debate that the stake is in fact large, but “large” can be a relative term to investors like Icahn. More details should be available when Form 13F filings for the second quarter are released, but that won’t happen until late July or August.

Icahn, Caesars Have History

While Icahn said he’s not planning activist moves with Caesars, he’s familiar with the company and has previously pushed for change there.

In 2019, Ichan’s Icahn Enterprises took a roughly 10% stake in “old Caesars”, positioning him to later become the architect of the $17.3 billion acquisition by Eldorado Resorts – the transaction that created “new Caesars.” Eldorado management, including CEO Tom Reeg, now run the show at Caesars. Icahn reportedly has ample respect for Caesars current management team, including Reeg, and that may have been some of his motivation for investing in the company a second time.

Icahn is one of the most successful, well-known activist investors of all-time. When those market participants get involved in a company, they typically push for board seats and some form of change, be it shedding of lagging assets, spin-offs, or outright sales.

It’s possible that Icahn could later shift to activist from passive investor in Caesars, but for now, it appears his renewed affinity for the stock stems from its status as a value play and the point that the Las Vegas Strip continues experiencing strong demand. Caesars, which is the second-largest operator on the Strip, has been heralded as a value idea by some other professional investors.

Icahn Has Lengthy Gaming Industry History

In addition to pushing old Caesars to accept the Eldorado acquisition offer, Icahn has long-running imprints on the gaming industry, including buying a pair of bankrupt Atlantic City operators, Tropicana Entertainment and Trump Entertainment Resorts.

That is to say he’s knowledgeable of the business and could be of assistance to Caesars should management want to tap his experience.

The gaming company has been criticized for its large debt burden, which stood at $12.436 billion at the end of the first quarter, and some investors have signaled they’d like to see Caesars more rapidly reduce that figure. On the firm’s first-quarter earnings conference call, Reeg said Caesars is open to selling “non-core” assets though he didn’t elaborate on what those could be. He did, however, note the company runs some gaming venues “that produce very little or no cash flow” and aren’t essential to its long-term plans.

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