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Gaming Expansion Fizzles in States
Sat Apr 13, 7:33 PM ET
By Doug Young
LOS ANGELES (Reuters) - A string of initiatives to legalize casino gambling in several states has lost steam in recent weeks, dampening hopes that the nation's major casino companies could use the markets to spur new growth.
A wave of optimism over initiatives in states such as Kentucky, Kansas, Pennsylvania and Rhode Island helped spur a major rally in casino stocks in recent months as shares prices for major companies nearly doubled from post-Sept. 11 lows.
Many states had looked to legalized gambling to boost revenues and offset budget shortfalls in the current recession, but legislative efforts fell short as the sense of urgency faded amid signs the economy was improving, analysts said.
In some cases, legal wagering takes as much as two years to boost state coffers, according to analysts. That notion, coupled with a fledgling economic recovery and generally negative feelings toward gambling weakened the push in recent weeks, they said.
"Nothing's happening this year," said Bear Stearns financial analyst Jason Ader.
"If the economy gets better, nothing's happening next year either. Gaming expands when states are in crisis. With the economy's prospects getting better, I'm not optimistic that 2003 is going to bring a lot of new results for gaming initiatives," he said.
The legislative stall has taken the steam out of major casino stocks, which had been on a run since dropping sharply after Sept. 11.
MGM Mirage stock surged from a post-Sept. 11 low of $18 to recent peak of nearly $37 a share in early March, but has lingered in the $35 to $36 range since then. Likewise, Park Place Entertainment Corp. stock rose from a low of $6 a share to the $10 to -$11 range, where it has remained steady since early March.
The shares of Harrah's Entertainment Inc. and Mandalay Resort Group have followed similar paths, plateauing in the $44 and $30 ranges, respectively, since early last month.
In one of the latest of a series of setbacks, the Kentucky legislature adjourned last week without passage of a bill to legalize slot machines at racetracks in the state.
In another, a Kansas bill calling for legalized slot machines in racetracks recently failed in the state legislature.
Also, in two Native American casino-related initiatives, a bill that would have permitted Native American casinos failed to advance from a second-round debate in the Nebraska state Senate, while the Rhode Island House last week postponed a vote on a proposed study on tribal casinos.
"The momentum for new states to legalize gambling this year has really petered out," said UBS Warburg analyst Robin Farley. "There was a lot of horse trading in March to get support for these bills. But the bills didn't get the support they needed."
Farley said the last successful legalized gambling initiative not related to Native American casinos came in 1996, when legislation was successfully passed paving the way for new casinos in Detroit.
Ader said that two legalization drives in Ohio and Pennsylvania may still have a chance of passage, although movement is unlikely in the current year.
Sat Apr 13, 7:33 PM ET
By Doug Young
LOS ANGELES (Reuters) - A string of initiatives to legalize casino gambling in several states has lost steam in recent weeks, dampening hopes that the nation's major casino companies could use the markets to spur new growth.
A wave of optimism over initiatives in states such as Kentucky, Kansas, Pennsylvania and Rhode Island helped spur a major rally in casino stocks in recent months as shares prices for major companies nearly doubled from post-Sept. 11 lows.
Many states had looked to legalized gambling to boost revenues and offset budget shortfalls in the current recession, but legislative efforts fell short as the sense of urgency faded amid signs the economy was improving, analysts said.
In some cases, legal wagering takes as much as two years to boost state coffers, according to analysts. That notion, coupled with a fledgling economic recovery and generally negative feelings toward gambling weakened the push in recent weeks, they said.
"Nothing's happening this year," said Bear Stearns financial analyst Jason Ader.
"If the economy gets better, nothing's happening next year either. Gaming expands when states are in crisis. With the economy's prospects getting better, I'm not optimistic that 2003 is going to bring a lot of new results for gaming initiatives," he said.
The legislative stall has taken the steam out of major casino stocks, which had been on a run since dropping sharply after Sept. 11.
MGM Mirage stock surged from a post-Sept. 11 low of $18 to recent peak of nearly $37 a share in early March, but has lingered in the $35 to $36 range since then. Likewise, Park Place Entertainment Corp. stock rose from a low of $6 a share to the $10 to -$11 range, where it has remained steady since early March.
The shares of Harrah's Entertainment Inc. and Mandalay Resort Group have followed similar paths, plateauing in the $44 and $30 ranges, respectively, since early last month.
In one of the latest of a series of setbacks, the Kentucky legislature adjourned last week without passage of a bill to legalize slot machines at racetracks in the state.
In another, a Kansas bill calling for legalized slot machines in racetracks recently failed in the state legislature.
Also, in two Native American casino-related initiatives, a bill that would have permitted Native American casinos failed to advance from a second-round debate in the Nebraska state Senate, while the Rhode Island House last week postponed a vote on a proposed study on tribal casinos.
"The momentum for new states to legalize gambling this year has really petered out," said UBS Warburg analyst Robin Farley. "There was a lot of horse trading in March to get support for these bills. But the bills didn't get the support they needed."
Farley said the last successful legalized gambling initiative not related to Native American casinos came in 1996, when legislation was successfully passed paving the way for new casinos in Detroit.
Ader said that two legalization drives in Ohio and Pennsylvania may still have a chance of passage, although movement is unlikely in the current year.