On Nov. 19, Caesars Entertainment quietly withdrew its planned initial public offering (IPO) of roughly 10% of the company. First dibs on the shares went to Wall Street investment firms and they showed little appetite for a company carrying approximately $20 billion in debt.
"The most successful IPOs this year are from companies that show revenue growth, higher profits (or at least shrinking losses) and manageable debt," reported Business Week. Caesars didn’t meet those criteria and was coming off a money-losing third quarter.
Although the company had hoped the stock would trade initially between $15 and $17 per share, indications from the investment community were that $10/share was the best-case scenario. The main reason Wall Street shied away from Caesars was its disproportionate debt-to-cash-flow ratio (11-to-1), the second-worst of any IPO floated this year.
The collapse of the IPO prompted hedge-fund tycoon John Paulson to begin liquidating his stake in Caesars.
It also means the projects that the IPO was meant to finance (including completion of the Octavius Tower at Caesars Palace) will now have to be funded out of cash on hand or additional borrowing.
