Several news sources have now reported that the Missouri Gaming Commission has filed documents with the Securities and Exchange Commission (SEC) announcing the intent to revoke Pinnacle Entertainment’s (NYSE:PNK) gaming license for the President Casino. According to Executive Director Gene McNary of the Missouri Gaming Commission, the commission staff will recommend that the casino’s license be revoked, with operations to discontinue as of July 1. This meeting is scheduled for Wednesday, January 27, 2010. Pinnacle Entertainment’s legal counsel has stated that the company will “pursue all legal remedies to protect our license,” and has already asked a state appeals court to postpone Wednesday’s proceeding (a request which has already been denied). The process to revoke the license is relatively simple and brief, so the decision may already be a fait accomplis. Or to put it in gamblers’ terms, the President Casino may be drawing dead.
I’m concerned about the potential conflict of interest in this conflict. McNary cited a “decline in performance” as justification for the decision. And to be fair, his statement is correct. Revenues at The President Casino have declined steadily since 2005, with a significant drop in 2008. So the Commission has a valid point in wanting the license to go to a property that produce more tax revenue for the state. But does the Commission bring in more revenue by revoking the license and putting it up for bid rather than letting Pinnacle keep and renew the license at another location? Why take the license away a year early (Pinnacle Entertainment bought the license as part of its acquisition of the President Casino in 2006, and that license is supposed to be good through 2011) and force Pinnacle to bid for it against other suitors? Could the fact that the Commission knows there are several other parties interested in the license influence their decision to revoke and resell the existing license?
Why not give Pinnacle a chance to earn that revenue? Pinnacle has already expressed interest in using the license for another casino in the hotly contested North County area - one of three speculated locations for a new casino. Pinnacle also has a proven record of success, with Lumière Place Casino earning some of the highest revenues in the St. Louis gaming market, even in a down economy. Pinnacle has employed more than 1000 people at Lumière and is currently hiring more than 1000 more employees for the new River City Casino, due to open in March. Pinnacle offers a compelling record of success. Why would the Commission not give them another chance to do more of the same?
From an investment standpoint, it seems much more risky to give the license to another entity, which may or may not have the same record of success in the St. Louis market. Does the potential, one-time revenue boost from reselling the license offset this risk? Does it make sense to trust a company that has 2 successful operations in the St Louis are to try for a third? In the long run, what’s the best option for the people of Missouri?
Tags: admiral, casino, gambling, lumiere, Missouri, mo, pinnacle, president casino, river city, river city casino, st louis
February 7, 2010 at 11:45 am |
[...] new jobs and new leadership. They are also going to be shedding some properties (Atlantic City and possibly the President Casino). On the other hand, the properties they’ll be left with could be some of their most [...]
February 7, 2010 at 11:45 am |
[...] new jobs and new leadership. They are also going to be shedding some properties (Atlantic City and possibly the President Casino). On the other hand, the properties they’ll be left with could be some of their most [...]