Investors, Las Vegas Sands hit jackpot as stock goes public

Casino company sells on NYSE for first time, raises $690 million

December 16, 2004 - On its inaugural day of trading on the New York Stock Exchange, Las Vegas Sands became the industry's largest gaming company in terms of market capitalization after its stock price jumped 61 percent Wednesday.

The operators of The Venetian recorded the biggest opening day of any American-based initial public offering in the past two years, according to Thompson Financial, surpassing Shopping.com's 60 percent first day gain on Oct. 25 as the best performance in 2004. Jet Blue's initial price rose 67 percent on its first day of trading in 2002.

According to analysts, Las Vegas Sands' closing price of $46.56, a $17.56 increase over its initial pricing of $29, was centered upon the success of the company's 4,000-room Venetian on the Strip and its Sands Macau property, the first Las Vegas-style casino in China; as well as future prospects including the planned 3,000-room Palazzo project next to The Venetian and additional casinos in Macau.

Applied Analysis, a Las Vegas-based financial adviser, charted Las Vegas Sands' market capitalization -- the number of available shares multiplied by the price per share -- at almost $16 billion, well ahead of MGM Mirage, whose market capitalization multiplied out to $9.5 billion.

"To be quite frank, yes, I'm surprised at the closing price," Brian Gordon of Applied Analysis said. "The run-up on the stock price was unbelievable. It shows that the hype surrounding the Las Vegas market is being felt all over and Las Vegas Sands could not have picked a hotter time to have gone public."

For its 23.8 million shares that were made available to the public, Las Vegas Sands reaped proceeds of $690 million, which will be used for the Palazzo and Macau projects.

Only 6.8 percent of Las Vegas Sands was placed on the market. Company Chairman Sheldon Adelson, 71, maintained an 87.9 percent ownership while management and directors of the company constitute a 5.3 percent ownership.

"It comes down to the dynamics. Only 7 percent of the company is out there and people wanted to buy the stock," Gordon said. "That helped run up the price."

Many analysts believed the showing by Las Vegas Sands bodes well for the rest of the gaming sector.

"This transaction confirms the strength investors have in the gaming industry," said Andrew Zarnett, a casino industry bond analyst for Deutsche Bank. "It also sends a strong affirmation and a great pat on the back to Sheldon Adelson and his business model for the growth of the company. There were not a lot of believers as late as last year. There are clearly a lot more believers now."

Analysts also said Las Vegas Sands could have collected additional estimated proceeds of $400 million, had the company set the initial stock price higher.

After originally announcing the initial offering at an estimated range of $20-$22 a share and increasing the price last week to the $24-$26 range, the company set an initial price of $29 Tuesday evening. However, the stock priced at $36.01 when the market opened and never looked back. Nearly 26.3 million shares were traded throughout the day, reaching a high of $49.45 by 1 p.m. EST, before scaling back in price.

Adelson, his management team, company directors and their families participated in the stock exchange's opening ceremonies, with Adelson ringing the bell to signal the start of trading. Earlier, Las Vegas Sands officials had breakfast with stock exchange members while Adelson was given a bronze statute and a framed listing certificate.

Las Vegas Sands spokesman Ron Reese said company officials were not available for media interviews because 25 days are still left in the Securities and Exchange Commission-mandated "quiet period" surrounding a stock offering.

Robert Britz, New York Stock Exchange president and co-chief operating officer, third from left, joins Sheldon Adelson, fourth from left, chief executive officer of the Las Vegas Sands, and others, for the opening bell at the New York Stock Exchange on Wednesday. Photo by The Associated Press.

In Las Vegas, area stockbrokers and financial consultants said interest was mixed among local investors. Many parties wanted in on the IPO after missing out when Wynn Resorts went public last year. Others thought the stock price was too high an investment.

"We had two different clients who each put an order for 10,000 shares," said Ken Heck, a financial consultant for A.G. Edwards. "One person was in it for whatever the price was and the other person said $42 a share was too rich. We had all sorts of people interested in the Sands because they wanted to get in for the long term."

Barbara Robertson, an investment representative with Edward Jones, said the company is conservative toward IPOs, but she didn't discourage clients interested in the company.

"We had a few customers purchasing blocks of 100 shares," she said. "They viewed it as a long-term investment."

John Futrell of Futrell Financial Management said that Las Vegas investors know The Venetian and were excited about the public offering.

"Today's price was a matter of supply and demand," Futrell said. "Too little supply and a lot of demand. The fact that so few shares were available influenced the price."

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