Dive Brief:

• Bally’s Corporation submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission to propose an initial public offering of ownership interests of the company’s planned $1.7 billion resort and casino project in Chicago. 
• The initial public offering is expected to occur after the SEC completes its review process. The number of ownership interests to be offered, their terms and the price range for the proposed offerings have not yet been determined. 
• The ownership interests would be offered to Chicago residents that qualify under the requirements in the Host Community Agreement made between Bally’s Chicago and the city. This type of restricted ownership is nearly unprecedented, one expert says.

Dive Insight:

Bally’s Corporation intends for “minority investors” to own a 25% stake in Bally's Chicago, the 30-acre project slated to feature a casino, 10 food and beverage venues, a 500-plus room hotel tower and a 70,000-square-foot entertainment center at Chicago Avenue and Halsted Street. 

Investors will include “philanthropists, business owners, sports stars, celebrities and everyday Chicagoans from the Black and Latino communities, as well as other ethnic and gender representation,” according to Bally’s Chicago website. 

It is uncommon but not unheard of for a company to create an IPO for a casino or resort project, according to Jay Ritter, Joe B. Cordell Eminent Scholar Chair at Warrington College of Business at the University of Florida. He said, in general, a company may do this to help raise funds for a development project and use the separate corporation as a safeguard against any legal or regulatory issues that could arise — like the passing of new taxes on casino revenue. 

In 2002, Wynn Resorts created an IPO of 34.62 million shares of its common stock at a price of $13 per share to partially fund its $2.5 billion luxury resort project, Le Reve in Las Vegas. Similarly, Las Vegas Sands Corporation created an IPO in 2004 to help fund development projects in Macau and the U.K.

What sets Bally’s Chicago apart is the restricted ownership element, according to Ritter, who said, “I'm hard-pressed to think of any other publicly traded corporation that has geographical restrictions on it.” 

The main strategic reason for restricting the stakeholders to the local community is likely to generate local political support and deter future “rapacious politicians” from increasing taxes on the project, Ritter said. 

“After they've spent $1.7 billion, there's the danger of [local officials] boosting taxes or other fees or putting other restrictions on the project, and it's one thing if that then hurts the shareholders of some private equity firm in New York, but it's another thing when it's basically a wealth transfer from local residents to local residents,” Ritter said. 

Ritter foresees this being a one-off occurrence, noting a negative aspect of the restricted ownership structure is that it creates a less liquid market that restricts who potential buyers could be.

Bally’s Corporation could not be reached for comment.