Scientific Games shares down 66 percent since early 2018
Billionaire Ron Perelman is scooping up shares of his Las Vegas-based slot and lottery company after they tumbled 76 percent from their May peak.
Perelman bought 900,000 shares of Scientific Games from Dec. 20 to Dec. 26, according to filings with the Securities and Exchange Commission.
Perelman increased his stake in the Las Vegas-based company to roughly 39 percent. He paid about $14.5 million for the shares.
Scientific Games has been the worst-performing gaming stock this year as a hike in interest rates and weakness in the high-yield debt market rattled investors. The stock drop wiped more than $1 billion off Perelman’s net worth.
Scientific Games has a whopping $8.7 billion in long-term debt, while the ratio of its net debt to expected 2018 cash flow is 6.5 times, according to Barry Jonas, an analyst at SunTrust, Robinson Humphrey brokerage.
“Just given the leverage, you see a lot of volatility in the stock,” said Jonas.
The company’s shares have also been affected by the August loss of a key contract with Boyd Gaming Corp., as well as a legal settlement with Shuffle Tech for $152 million.
On Friday, shares of the company rose 4 cents, or 0.2 percent, to $17.49.
The shares are down 66 percent since the start of the year and have fallen from their May closing peak of $62.05 to a December closing low of $15.13.
Analysts are upbeat about the outlook for Scientific Games next year, forecasting that the company will increase its earnings before interest, taxes, depreciation and amortization and pay down debt.
The legalization of sports betting in the U.S. could open the door to higher revenue for Scientific Games, which offers wagering services.
The company also announced it may sell shares in its social gaming division in an initial public offering next year. The cash generated from the share sale would enable Scientific Games to further pay down its debt.
“We would like to see them focus on deleveraging at this point,” said Jonas.
Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.