Posts Tagged ‘slots’

By Ray Paulick

UPDATED TUESDAY EVENING:

 Stock prices soared Monday in Magna Entertainment, the racetrack company that operates Laurel Park and Pimlico in Maryland, where voters are deciding today on an amendment to allow 15,000 slot machines at five locations in the state.

The share price jumped by 92%, from $1.82 at the opening bell to $3.50 by the day’s close. Magna Entertainment, which also operates Santa Anita Park, Golden Gate Fields, Lone Star Park, and Gulfstream Park, among other tracks, trades on the NASDAQ under the symbol MECA. One-day trading was the heaviest that it’s been since Sept. 30, when the stock plummeted from $4.00 to $1.75. Earlier this year, Magna exercised a 20-for-1 reverse stock split to maintain its position on the NASDAQ.

UPDATE: Tuesday afternoon, Magna Entertainment sent out a press release saying the company "is not aware of any specific developments" connected with the sudden increase in share prices. MECA closed at $3.97 Tuesday afternoon, an increase of another $.47 (13.4%). 

Even with Monday’s gains, adjusted share prices are down 95% from what they were when MECA went public in 2000. The company is saddled with hundreds of millions of dollars of debt.

Polls indicate the Maryland constitutional amendment permitting slots will pass, though there is no guarantee that Magna Entertainment will be one of the operators of the slots parlors. Approximately 7% of revenue from the machines will subsidize horse racing purses, with 2.5% going to racetrack renewal.

When Magna Entertainment purchased the two Maryland Jockey Club tracks from the family of Joe and Karin De Francis, the agreement gave the former owners 18% of any future profits MECA earned from slot machines.

The company announced Monday that a previously announced deal fell through to sell excess property near Ocala, Fla., where company chairman Frank Stronach had once hoped to build a racetrack.

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Richard Duchossois, who became the largest shareholder in Churchill Downs Inc. when his wholly owned Arlington Park racetrack was merged with Churchill in September 2000, has been steadily adding to his holdings over the last 10 months. In September alone, the Chicago industrialist has purchased 17,296 shares of CDI.

As part of the original agreement to merge Arlington into Churchill, Duchossois Industries received 3,150,000 shares of CDI and had a right to receive another 1,250,000 shares.

Last November, Duchossois bought nearly 15,000 additional shares in the $49-$50 per share range. In December he bought approximately 25,000 in the $52 range. In March he purchased 69,000 at prices between $45-$47 per share. In August he bought 29,000 shares, about a third of them at $37 per share and the rest around $43.

Churchill stock (CHDN) closed at $50.48 per share on Friday.

The only other major insider trading transactions of CDI stock in the last year was the sale of 15,931 shares by CEO Bob Evans.

Churchill officials are hoping the Kentucky legislature passes legislation permitting racetracks in the state to add slot machines as several other racing states have done, including to the north and West Virginia to the east. Pro-slots legislator Greg Stumbo (formerly the state’s attorney general) said recently he will mount a challenge to be Kentucky’s speaker of the house, a position currently held by Jody Richards, who has fallen into disfavor with many in the horse industry because he blocked a casino bill earlier this year.

The company has had some difficulties in 2008 over contract negotiations with horsemen at CDI-owned Calder in Florida and its flagship track in Louisville, Ky. Purse cuts resulted at both tracks. It will be adding slot machines at Calder after a local referendum was approved, and its other track, Fair Grounds, will be offering record purses at its upcoming meeting, thanks to slot machine revenue.

Churchill Downs Inc. and the Florida Horsemen’s Benevolent and Protective Association came to terms on a 2008 purse contract for Calder Race Course and on a contract for slot machines whenever the gambling machines begin operations at the Miami-area track.

The agreement means simulcast will once again be available on Calder’s races, effective this Thursday. The agreement is for simulcasting but not account wagering.  

 A statement from CDI said negotiations will continue to resolve issues related to the distribution of revenue from account wagering.

 According to a press release, Florida horsemen are guaranteed $14.375 million for purses in the first three full years of the slots operation and 6.75% of slot revenue for the remainder of the 10-year term. Additional provisions provide for the horsemen to share in the upside should the Calder slot facility generate specified slot revenue minimums in the second and third full years of operations.

CDI said it has agreed to drop without prejudice its lawsuit filed April 24 against the FHBPA and its officers.  The suit, which alleged violations under the Sherman Antitrust Act, will continue against the remaining parties, including the Thoroughbred Horsemen’s Group, a newly formed company that is negotiating purse contracts on behalf of numerous state horsemen’s organizations.

By Ray Paulick

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