Chairman sells 6 percent of his Primadonna stock

Wednesday, June 3, 1998 | 10:32 a.m.

Amid persistent rumors that his company may be sold, Gary Primm, chairman, chief executive and president of Primadonna Resorts Inc., has sold 1.18 million shares of his personal Primadonna stock holdings in the past month.

The shares represent 4 percent of the company, or 6 percent of Primm's holdings. Prior to the sale, Primm owned 19.6 million Primadonna shares -- 67.9 percent of the company.

A Primadonna official said Primm sold his shares for personal reasons.

"He has sold stock to meet some personal obligations he has had since the company went public," said John Shigley, Primadonna's chief financial officer. "He is still a big believer in the company."

Analysts are split on the meaning of the sales, with some calling them an expected move from an executive who owns a hefty stake in his company, and others calling them a reflection of Primm's lack of confidence in Primadonna stock. But they agree the timing of Primm's stock transactions means the sale of the company is not imminent.

"One would have to believe that if there was an imminent sale that he wouldn't be selling his stock in front of that sale," said Andrew Zarnett, an analyst with Ladenburg, Thalmann & Co., in New York.

Stacey Griffin, an analyst at the inside transaction research firm CDA Investnet, in Fort Lauderdale, Fla., agreed with Zarnett's analysis.

"Typically, before a deal there's no activity for three months," Griffin said. "Most companies as a general rule have a lockout period before a deal."

Primadonna stock closed down $1 to $16 Tuesday, on heavy volume. Primm's sales were all made in the $17 to $18 range.

Primadonna owns three casinos along the Nevada/California border, and a 50 percent interest in the New York-New York hotel-casino on the Las Vegas Strip. In the first quarter, the company earned $5.8 million, or 20 cents per share, down from $10.1 million, or 34 cents per share earned in the first quarter of 1997. Revenues fell from $71.5 million to $66.6 million.

At the time the company announced its first quarter earnings, it said it would cut staff in an effort to reduce costs. The company has been rumored to be for sale for months, and in fact Craig Sullivan, the company's former chief financial officer, told Bloomberg News in March that Primadonna is for sale at the right price.

Shigley declined to comment on rumors of a sale.

According to CDA Investnet, Primm's stock sales are his first since 1996, and are far larger than those earlier dispositions.

"He was a fairly steady seller in all of 1996, but he never sold that many shares," said Stacey Griffin, a CDA analyst.

In all of 1996, Primm sold 575,000 shares, Griffin said.

Dave Ehlers, chairman of Las Vegas Investment Advisors Inc., does not think the sales are terribly significant, given Primm's large stake in Primadonna.

"As a professional investor, I don't think that his selling of stock, it doesn't weigh in my calculation of the value of the stock," Ehlers said. "He owns more than 35 percent of the stock."

Before the sales, Primm personally held 34 percent of the company's stock, and held an additional 34 percent in trust funds.

But Griffin said Primm's sales reflect a lack of confidence in the future of Primadonna's stock.

"It definitely indicates that he doesn't expect a higher share price, because he's selling so far off the highs, and he's selling so much," Griffin said. "He didn't sell at all in 1997, when the stock was higher."

Over the past year, Primadonna's stock has traded as high as $22.50 in May, 1997, and as low as $14, in December. The stock fell from the $20 range in mid-April to below $16 in mid-May, and had since climbed slightly above $17.

"It's very negative to see him selling down here, whether or not there's a deal," Griffin said.

Shigley said Primm's selling was driven by personal considerations, not a lack of belief in the company.

"It certainly does not reflect less of a belief in the company," Shigley said.