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BYD is up 20% after announcing the postponement of construction on Echelon. I’ve thought for a long time that Boyd had some levers to pull to increase shareholder value and this was one of them. PNK also has options. Management certainly has the financial incentive. As can be seen in the chart, the in-the-money value of CEO Dan Lee’s options fell from a peak of $36million down to $2million.

What can they do? Unlike BYD before today, PNK actually maintains decent liquidity. However, there is significant negative equity value in the stock associated with expectations of future projects. I believe if PNK just announced the intent to sell the AC land, even at a loss, even with the tax ramifications, the stock would go up. AC costs PNK about $15-20 million a year. Given the relative strength of the LA and TX economies, Sugarcane Bay is not a terrible project but ROI is likely to be low. I’d prefer to see PNK try to negotiate with the State to postpone Sugarcane Bay but develop Baton Rouge. I’m still constructive on the South County St. Louis project (fully financed).

Oh I almost forgot the best shareholder creating option of all: selling the company. There is only one buyer out there. A PENN/PNK deal sure seems to make a lot of sense.


Incentive in place to increase shareholder value