Sinclair Broadcast Group Selling 7.91 Million Bally’s Shares
Posted on: April 12, 2024, 05:05h.
Last updated on: April 14, 2024, 07:44h.
Sinclair Broadcast Group (NASDAQ: SBGI), the operator of regional sports networks (RSNs) that bear the Bally’s (NYSE: BALY), is selling 7.91 million shares of the casino stock.
In a Form S-3 filing with the Securities and Exchange Commission (SEC) released Friday, Bally’s told investors it registered to sell 7.91 million shares on behalf of an entity known as SBG Gaming, LLC. Other SEC documents reveal SBG Gaming is a unit of Sinclair.
The shares of common stock offered hereby are being registered for the account of the Selling Stockholder. All net proceeds from the sale of the shares of common stock will go to the Selling Stockholder. We will not receive any part of the proceeds from such sale of the common stock,” according to the Bally’s regulatory document.
As of March 20, the gaming company had 40,426,353 shares of common stock outstanding, meaning the share sale registered on behalf of SBG Gaming is equivalent to 16.37% of that total as noted in the SEC filing.
How Sinclair Came to Own Bally’s Stock
Sinclair’s stake in Bally’s came about in late 2020 when the gaming company agreed to reportedly pay $85 million over 10 years to put its name on the media group’s RSNs.
Under the terms of that agreement, Sinclair also received a 15% equity stake in the casino operator and rights to own up to another 15% over time if certain financial objectives were met. At the time the deal was struck, Sinclair’s interest in Bally’s was worth about $137 million, but based on the stock’s closing price of $13.41 today, 7.91 shares fetch roughly $106 million.
It’s some, but not much compensation for Sinclair, which overpaid for the RSNs and has since grappled with the financial health of those networks.
Sinclair acquired the 21 RSNs from Walt Disney for $10.6 billion in 2019 as part of the latter’s efforts to divest some assets to gain regulatory approval for its acquisition of 21st Century Fox. At the time, the networks, which bear the Fox Sports name, were reportedly valued at least $16 billion.
Last November, Sinclair in partnership with Bally’s Chairman Soo Kim, reportedly offered $850 million to regain control of bankrupt Diamond Sports Group. Diamond is the holding company for the Bally’s-branded RSNs.
Sinclair Divesting Bally’s Stock at Interesting Time
The announcement that Bally’s is selling stock on behalf of Sinclair arrived about a month after Kim’s Standard General hedge fund offered $15 a share for the gaming company — its second takeover bid for the operator in which it’s the largest shareholder in two years.
Bally’s Form S-3 filing doesn’t disclose a reason why Sinclair is selling its stake and the media company has yet to comment on what its plans are for the proceeds.
“The Selling Stockholder will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and under terms then prevailing or at prices related to the prevailing market price or at negotiated prices,” said Bally’s in the regulatory document.
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Bally's chances now for a successful new casino are identical to a blank vaccine card. They don't have a shot!
The all-time high record closing price for BALY stock was $73.63 in March 2021. Here's what Sinclair Broadcast Group posted on 3/31/2021: "Next Generation of Bally Sports is the First of Many Milestones within the Sinclair and Bally’s Partnership BALTIMORE – Today, Sinclair Broadcast Group (NASDAQ: SBGI) and Bally’s Corporation (NYSE: BALY) announced the official rebrand of its regional sports networks (RSNs) as Bally Sports, ushering in a new era in the way people watch and interact with live sports." Now we can see why Sinclair Broadcast Group is no longer thrilled about THAT business decision and made THIS business decision.
Sinclair Broadcast Group watches closely how BALY stock struggles to surpass even a $14.00 valuation. When will Bally's future accelerating casino revenue that is hoped for actually be achieved? An important factor in generating that revenue includes retaining new customers. Bally's Chicago will get only one chance to make that first impression with each new customer. Ask Bally's current casino hotel guests nationwide if they are genuinely happy with their most recent visits to the many Bally's casino hotel properties throughout the country. Read the most recent online reviews for Bally's casinos posted in just the past six months. Ask those same patrons how soon they plan to return. Are they telling their friends, "That was really a great time at Bally's last weekend! It was over the top and I enjoyed everything about the place. Let's plan to go back there as soon and often as we can!" You won't a find a single review like that, especially if you don't take the time to actually look for the current pulse check of what is going on right now. Maybe repeating the same actions over and over again while expecting different results will not contribute to the accelerating casino revenue that is being hoped for by Bally's. Those current customer reviews spell it out right now in real time.
Sinclair is in a position to know more about Bally's future prospects (including Soo Kim's takeover bid) than most. It looks like they are cutting their losses.... last one out, don't forget to turn off the lights!
A smart move by Sinclair and a much better decision than straightening the deck chairs on the Titanic!