Big Circus Circus holder sells 6.6% of the company

John Wilen

Thursday, June 11, 1998 | 11:24 a.m.

A major Circus Circus Enterprises Inc. shareholder has sold more than 6 percent of the company.

Institutional investment firms Fidelity Management & Research Co. and Fidelity Management Trust Co. have sold 6.3 million shares of Circus Circus stock, an amount equal to 6.6 percent of the company's outstanding shares. Both companies are subsidiaries of FMR Corp., of Boston, which is better known as Fidelity Investments.

The sale, revealed in Securities and Exchange Commission filings, drops Fidelity's stake in Circus Circus from 9.7 percent to 3.1 percent.

Circus Circus officials declined comment today, referring all questions to Fidelity. Fidelity did not return calls for comment.

The sales did not surprise Dave Ehlers, chairman of Las Vegas Investment Advisors.

"Circus has had nothing but earnings problems in a difficult environment," Ehlers said. "And Wall Street has lost confidence in Circus's ability to deliver as they promise."

Circus Circus' profits have fallen steadily since 1995, when the company earned $136.3 million, or $1.59 per share. In its last fiscal year, which ended Jan. 31, the company earned $89.9 million, or $0.95 per share.

The company's stock has trended down since last summer, when it approached $27. Despite a rebound to the $26-range in March -- due to merger talks with Hilton Hotels Corp. that failed -- the stock has dropped over the past three months, closing below $17 on Tuesday. The stock opened this morning by hitting a 52-week low of $16.63 before rebounding to $16.75.

Ehlers said many on Wall Street are worried about Circus Circus' inventory of older properties -- including Circus Circus-Las Vegas and the Gold Strike Hotel -- and newer properties south of Tropicana Avenue on the Strip like Luxor and Mandalay Bay, which is under construction.

"Circus has a lot of old rooms in Las Vegas ... and they've invested a half a billion in the last year ... and it hasn't paid off," Ehlers said.

As of Jan. 31, the company had spent $273.1 million building Mandalay Bay, and $425 million remodeling and building two new hotel towers at the Luxor. Outside of Las Vegas, the company spent $140 million building a hotel tower addition at its Tunica County, Miss. casino; $28 million to remodel its Circus-Circus Reno casino; and $11 million on improvements at its Colorado Belle casino, in Laughlin.

Circus Circus is planning a $225 million casino along the Gulf Coast in Mississippi. It plans to spend at least $120 million on a joint venture to build a casino in Detroit. And it has an agreement with Mirage Resorts to participate in a casino project in Atlantic City.