Icahn saves Trump Dump; Disaster in Pennsylvania

Carl Icahn‘s abusive-codependent attachment to Trump Plaza knows no ends. In his latest gambit, the magnate has kiboshed the implosion of the ramshackle ex-casino that had been slated for sometime in February, by dint of obtaining a cease-and-desist order. Instead, dismantling of the crumbling relic will continue at a stately pace, with plans for the site still unknown. At least Icahn, who has repeatedly embarrassed Atlantic City, showed some grace this time. He short-circuited Mayor Marty Small‘s auction of the demolition rights by matching the leading bid—$175,000—and donating it to the Boys & Girls Clubs of Atlantic City. Our sincere thanks for that, Uncle Carl. “From the beginning, we thought the auction and any other related spectacle presented a safety risk, and we were always clear we did not want to participate in any way,” said an Icahn mouthpiece. Opined The Press of Atlantic City, “We hope this happy ending opens the way for redevelopment of the Plaza site for the benefit of all.” We hope so too.

The bottom fell out of Pennsylvania gaming revenues last month, tumbling 78% to $59 million. A Dec. 12-Jan. 4 closure of the Keystone State’s casinos is to blame. The upside was that sports-betting handle reached $548.5 million, which brought in $45 million in revenue—$34 million once promotions are deducted. Internet-gambling revenue shot up to $71.5 million, a one-fifth increase over November. Players gotta play. PlayUSA called the online results “shocking” in a good way, with analyst Dustin Gouker explaining, “Obviously, the growth online has come unfortunately as the retail market has faced pandemic-related shutdowns. But without the increase in online revenue, there is no telling how much weaker a position the entire industry would be in right now.”

FanDuel/Valley Forge Resort Casino led the market with $207.5 million in handle (although the house only made half of what it did in November), followed by DraftKings/The Meadows with $131 million, Barstool Sports/BetMGM/Hollywood Casino with $72 million, FoxBet/Mount Airy with $29 million, Bet Rivers (Pittsburgh) with $27 million, Parx Casino ($24 million), PlaySugarHouse ($22 million), Unibet/Mohegan Sun Pocono Downs ($9 million), BetAmerica/Presque Isle Downs ($1.5 million) and Harrah’s Philadelphia ($1.5 million). Gotta work on that, Caesars. As for i-gaming, analyst Valerie Cross put it well: “The revenue lost from casino closures could not have been foreseen and not be completely replaced, but there is no doubt the launch of online gaming helped stem the losses and steady the industry.” DraftKings/Penn National Gaming was tops was $23.5 million in revenue, followed by Rivers Philadelphia‘s $19 million. Mount Airy’s poker monopoly garnered $3 million. BetMGM launched Dec. 4 and already has 8% market share.

In the brick-and-mortar sphere, Live Pittsburgh debuted with $2 million, while Lady Luck Nemacolin scraped together $400K, an 85.5% downturn. As for the big(er) boys, Parx was by far the top grosser with $16 million, down 68.5%. SugarHouse, closed all month, was wiped out. Valley Forge plunged 74% to $3 million, Harrah’s tumbled 71% to $6 million. In Pittsburgh, Rivers plummeted 83.5% to $5 million, while The Meadows dove 79.5% to $3.5 million. Wind Creek Bethlehem plummeted 80% to $8.5 million. Mohegan Sun Pocono Downs fell 78.5% to $4 million. Hollywood Casino dove 73.% to $5 million, Presque Isle Downs plunged 82% to $2 million and Mount Airy shed 75% to $3 million.

Credit Suisse analyst Ben Chaiken added Penn National Gaming to his coverage universe today with a $128/share price target (the stock is trading at $99). He cited pandemic-related economies, recent acquisitions (read: Barstool Sports), aggressiveness in Internet gambling and “better-than-expected margins in sports betting.” Chaiken sees the Covid-19 shutdowns as a blessing in disguise which, together with a move toward cashlessness, will enable Penn to realize the $120 million in synergies it promised when it bought Pinnacle Entertainment (a move which, frankly, lent a little class to Penn’s Kmart empire). Also, expect to receive less direct-mail marketing. “As the topline returns to pre-pandemic levels we think these opportunities are being mis-modeled,” wrote Chaiken.

He continued that Penn was “uniquely positioned” to achieve high profit margins on sports betting and i-gaming, thanks in part to its 40-plus brick-and-mortar casinos and partly through “the Barstool brand’s unique customer acquisition channels … In iGaming, we think the combination of PENN’s 20m mychoice loyalty members, dominant physical casino footprint, and Barstool/PENN cross promotion/development, set PENN up to be a leader.” We’ll take Chaiken’s word for it. His logic is pretty inexorable.

Unhappy anniversary, Coronavirus. One year ago today you were initially detected in the U.S. Since then, 24,255,934 Americans have been infected (including some of our own friends and family) and 402,269 have died. This has to rank as the biggest public-health failure in American history. While we applaud President Biden’s goal of vaccinating 100 million citizens in the next 100 days we fear it is unrealistic, especially given how short the previous administration fell of achieving its own metrics in that regard. When will the casino industry recover from the pandemic? There is still no clear answer.

Incidentally, in one of the last acts of the Trump administration, Secretary of Commerce Wilbur Ross graced the casino town of Wendover with $1.8 million in CARES Act funds. We don’t think it’s going to casinos, though. The goal of the moolah is to “develop infrastructure to diversify and strengthen the local economy in response to adverse economic impacts caused by the coronavirus pandemic.” The money comes with a couple of strings attached: 60 acres must be opened to commercial development and the federal funds must be matched locally. But what is there to do in Wendover other than gamble? Wendover Will will be wearing a frown today.

Jottings: Dan Gilbert is out of the casino business. He has sold Jack Entertainment to its management team. The deal was cut in December but only just revealed … Internet gambling and online sports betting go live in Michigan at noon on Friday. Nine operators have been approved: Twin Spires (Churchill Downs), Barstool Sports, DraftKings, BetMGM, FanDuel, Wynn Resorts (Steve must be shaking with fury), William Hill, Rush Street Interactive and one other … Affinity Gaming has launched a REIT to pursue a casino acquisition, hoping to raise $150 million to $172.5 million through an IPO. No word yet on what they’re chasing … The venerable (1959) White Sands Motel is on the market. It’s located across Luxor (a plus) but occupies barely more than an acre (a distinct minus) … A Year of the Ox display has been unveiled in Bellagio‘s conservatory. Said designer Ed Libby, “This year, perhaps more than ever, we can all use an added dose of inspiration and love.”