Sands shares soar in debut on New York Stock Exchange

By Liz Benston

Wednesday, Dec. 15, 2004 | 11:16 a.m.

Investors hungry for a piece of the booming Las Vegas gaming market this morning snapped up the hottest casino IPO in recent memory, pushing shares of Las Vegas Sands Corp. more than 50 percent over its opening price of $29 per share on the New York Stock Exchange.

By mid-morning, the stock was trading at around $44.50 per share.

Before trading began this morning, bankers had raised the expected offering price by several dollars at a time.

About 23.8 million shares, around 7 percent of the company's outstanding stock, were registered for public sale today. The IPO raised more than $690 million based on the initial price. At $29 per share, the entire company is worth about $9.5 billion -- making it the world's largest gaming company, measured by market capitalization. Las Vegas Sands is expected to drop into the No. 3 slot after MGM Mirage and Mandalay Resort Group merge next year along with an even bigger merger between Harrah's Entertainment Inc. and Caesars Entertainment Inc.

The IPO increased the net worth of Chief Executive Sheldon Adelson, who has an 88 percent stake in the company, by about $8.9 billion. Adelson owns about 308.2 million shares directly and through trusts.

The stellar performance of the company's resorts in Las Vegas and the Chinese enclave of Macau as well as the overall health of the Las Vegas Strip have combined to create one of the best environments for a gaming IPO in history, experts said.

"Las Vegas is on fire and there are some pretty phenomenal numbers coming out of Macau," said Bill Newby, a managing director with Banc of America Securities.

The offering pushed up shares of Wynn Resorts Ltd. by more than three percent, to $68.66, in mid-morning trading. Shares of MGM Mirage also rose more than 2 percent to $69.18. Like Las Vegas Sands, both companies are building resorts in Las Vegas and Macau, considered the world's strongest casino markets.

"There's a tremendous amount of interest surrounding this company," added Brian Gordon, a principal with economic analysis firm Applied Analysis in Las Vegas. "They've performed at the top of the industry over the last several years."

Aggressive promotions for Las Vegas tourism coupled with television shows and other publicity has piqued consumer as well as investor interest, Gordon said.

"Las Vegas is white hot right now -- I don't think it could get any hotter," he said. "They couldn't have (gone public) at a better time."

At $29 per share, Las Vegas Sands is valued well above other major gaming companies relative to the amount of cash generated by its casinos, Gordon said.

"They are trading at a phenomenal multiple," he said. "People are investing based on the future of this company over the next 12 to 24 months."

Investor interest has been fueled by the success of the company's successful Venetian resort in Las Vegas, the Sands Macau casino in China as well as bullish prospects for the company's pipeline of new casino projects down the road, said Joe Fath, a gaming analyst with T. Rowe Price & Associates. The Baltimore company is one of many money management firms eyeing today's IPO.

Recent private casino purchases as well as speculation about land prices in Las Vegas is also intensifying investor interest, Fath said.

"Gaming is as hot as can be," he said. "Any (company) with assets on the Las Vegas Strip is getting much higher valuation" than in years past, he said.

The offering is also reflection of the acceptance of gaming stocks over the years, Newby said.

Bankers were reluctant to do casino deals in years past because of concerns about everything from perceived Mob ties to beliefs about casinos as "immoral" businesses, he said.

Times have changed. Investors have since gotten burned buying stocks with shady profits in less regulated industries, Newby said. Meanwhile, gaming is spreading, becoming familiar as well as extremely profitable.

"This is a cash business, by and large," he said. "There's not a lot of financial engineering going on and there's still some growth opportunity. It's a stable market and a highly regulated market. It's also something (investors) can see and touch."

Adelson's large stake in the company is somewhat unusual for stocks in general but doesn't appear to be a concern, experts said.

The offering isn't expected to change the management style or development plan for the company, which was always controlled from the top by Adelson, Gordon said.

"Adelson and his management team are still calling the shots as far as where developments will occur," he said.

Adelson also has assembled a strong management team capable of carrying the company forward in the long term, according to one analyst familiar with the company who declined to be named.

"The Macau (casino) is open and the Vegas operation is running smoothly. These other things are just cherries and whipped cream on top of an already solid cash flow," the analyst said.

The stock offering, though relatively small, cements the company's stature as a major player in the financial markets, the analyst said.

"They'll never do any more junk bond deals and there will never be any expensive bank deals. (Adelson) will forever be in the driver's seat."