7 ms·

A very Chicago gamble

178 points by gregorymichael 2y ago

llimani 2y ago
[flagged]
jeffgreco 2y ago
Some truly hideous AI art on this one.
nfriedly 2y ago
Holy fuck that's a terrible deal they offered on the $250 shares! Made up billion-dollar valuation aside, an 11% interest rate on a $24,750 loan means that it's never going to pay for itself and start producing a return for the owner, even at casino-level profits.
- deleted 2y ago
  [deleted]
- joezydeco 2y ago
  Bally's built a temporary casino in Chicago while the official one is getting funded up and built. Because, you know, you can't let that gaming license just sit there and do nothing. Sadly the temporary casino is only taking about 60% of projected revenue so far. https://www.yogonet.com/international/news/2024/10/16/82112-ballys-chicago-casino-shows-progress-but-revenue-falls-short-of-projections https://www.yogonet.com/international/news/2024/10/16/82112-... Bally blames the location and lack of parking and yadda yadda yadda, but Illinoisans are just saturated with gambling options right now. The suburban casinos, the Indiana casinos, Wisconsin first-nations Bingo, Illinois Lotto, the multi-state lotteries, home-rule gaming in restaurants and bars, online sports betting...we still have horse racing here for crying out loud. And, oh yeah, weed is legal here.
  - Loughla 2y ago
    One thing I noticed when I was last in Illinois is the absolutely amazing amount of slots "parlors". You can get a beer or something and they have 2 or 3 slot machines. They're everywhere. Like one out of every 10 businesses if I had to make up a number. And almost every gas station, bar, or restaurant has slot machines in them. What is happening in your state, Illinois?
    - smelendez 2y ago
      At least as of a few years ago, Illinois had the most of any state. https://features.propublica.org/the-bad-bet/how-illinois-bet-on-video-gambling-and-lost/ https://features.propublica.org/the-bad-bet/how-illinois-bet... And since they’re only allowed in certain municipalities (not Chicago, though you’ll see them around), you can sometimes drive down a road and see one side just lined with depressing slot machine parlors with names like Bob’s Lounge or Susie’s Cafe. That side is usually a poorer town that needs the revenue from the town on the other side, where the money is. I’m not sure why, but in my experience while those establishments nominally serve beer, liquor, coffee, soft drinks, and sometimes food, and are perfectly legal and open to the public, they do not seem at all welcoming to random people popping in who aren’t there to gamble. Or maybe they just don’t like my vibe. Perhaps some differ, but it’s a very different feeling than states like Louisiana or Nevada where lots of bars have gambling machines that are ignored by the majority of customers. It’s a shame, because I’m sure they’re crowding out other businesses, including regular bars and cafes that would serve a broader audience.
    - joezydeco 2y ago
      Two things: 1) The slots in bars and restaurants are a legitimization of the old video poker machines that the mob used to place in establishments. Can't beat 'em? Join 'em. https://www.gambling911.com/poker/video-poker-kingpin-gets-three-years-behind-bars-020812.html https://www.gambling911.com/poker/video-poker-kingpin-gets-t... That said, every town has the choice to allow them or not. They tend to fall like dominos when they see the revenue. I just saw a restaurant owner on Reddit say he made $100K profit last year, and the location's share is typically a third of the handle. 2) We're taxed so heavily on nearly everything it becomes incredibly easy to pitch additional gaming forms as "see, this will help fund schools!" or whatever cause is up next. Except we're gullible, never realizing that Lotto proceeds replace budgeted educational funds and not supplement them.
tedivm 2y ago
There's a lot of interesting stuff in here, but there's also a lot of garbage. Talking about the African American community in Chicago, but then using examples from LA to prove a point, is at best a horrible argument and at worst purposefully misleading. I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black. There are no pogroms happening here against people who aren't black, even if they do happen to own a business. This is just such a weird statement to have to make.
- shigawire 2y ago
  As with most Chicago critics, there are valid points to be made but it often feels too gleeful.
- likeabatterycar 2y ago
  > I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black. May I ask why? This seems like a deliberate choice. It is, at best, met with suspicion by other residents.
  - readthenotes1 2y ago
    I'm pretty sure hen wasn't given a deliberate choice whether to be Black or not.
    - likeabatterycar 2y ago
      > Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith. Chicago is an extremely segregated city. In segregated cities, there is a nuanced thought process one must undergo to move into an area where you are considered an outsider. In Seattle for example, the tech community is overall reviled for having gentrified the Central District, where historically black areas were bulldozed to erect overpriced cardboard apartments for tech plebes. This is a legitimate question.
      - 2y ago
mplewis 2y ago
[flagged]
- yesfitz 2y ago
  I agree. AI images communicate "low effort" at best and "untrustworthy" at worst, neither of which remotely describe Bits about Money.
- ryukoposting 2y ago
  I agree. I don't know why so many blogs feel the need to plaster disfigured AI-generated garbage across the tops of their posts now. What does this ugly picture add to the post? A little pagerank cred? 3 inches of shit I have to scroll past, increasing "engagement?" It certainly isn't adding anything to the quality of the content.
- Spivak 2y ago
  I think it's an interesting sign of the times when people are asking for stock images. To me the AI art is a marginal improvement over stock photos since they're plausibly unique and can be tailored somewhat more specifically to the article's content. Neither option is great, but we are talking about the digital equivalent of hotel art so the bar is pretty low. At least the author themselves had some input on the splash image compared to a stock photo.
  - mst 2y ago
    I'm (genuinely) fascinated by people having opinions about the splash image at all. When I click through to an article my first action is to PgDn past it without even registering the image, be it a photo (on a 'normal' new site), stock, or generated. If I actually try and think about it, I also marginally prefer AI because of the content tailoring thing, and thought the different elements that were coaxed out of the generator in this case were kinda neat. But people forming opinions about trustworthiness from the image is entirely alien to me (this is not to say they're wrong to do so, I simply ... don't).
adrianparsons 2y ago
This was an aside at the end of the article, but what an interesting strategy: I bought the stock for the same reason I buy stock in every hotel, airline, bank, and similar I use: in the unlikely event a not-particularly-high-stakes poker player has a routine customer service complaint, Investor Relations is available as an escalation strategy, over e.g. hotel staff who might be long-since inured to listening to complaints from people who lost money in a casino.
- pc86 2y ago
  I'm sure this works if you're buying a couple thousand shares at a time but I don't think buying 10 shares of Southwest is going to make them listen to you any more or less when you have an issue on your flight.
  - wging 2y ago
    I think the idea is to take advantage of certain legal obligations that are triggered by ownership of any size.
    - plagiarist 2y ago
      Could you give some examples? I have no idea what legal differences would provide a benefit during customer interactions.
      - tptacek 2y ago
        Has nothing to do with legal differences. It's just a different customer service team you end up talking to. It's in the same class of tricks as knowing the precise set of prompts to give to get immediately to a human operator when you call the main line.
  - pie_flavor 2y ago
    It doesn't matter whether they actually value you any more. The point is that investor relations is staffed by competent people, as opposed to customer service which is staffed by incompetent people as an intentional matter of efficient human capital allocation. So you can get much more reliable help if you can present the right class signals, and if you are at least theoretically allowed to call that line.
Animats 2y ago
I've seen worse deals offered in prospectuses. But not often. Having two tiers of stock with the insiders having the control shares used to be prohibited by the New York Stock Exchange. Now it's common. Google and Facebook are set up that way, so they have presidents for life. So are some lesser companies which really need to fire the CEO but can't. Then, what you're buying into is not the operating entity. It's just a holding company. Not even the parent holding company that owns many casinos; that's BALY. It's a holding company in the middle, one whose returns are totally determined by the other parts of the stack. This is much like film investing, where you can buy an interest in "Silver Screen Partners IV" and get a share of the profits from a specific film. Except that the studio and the film producer control the accounting between related entities. Those deals are generally a lose, although you get to go to the premier and meet the cast. And then there's the leverage. When you buy in, you're under water, and may stay there. Can't speak to the tax consequences. This is so awful it makes meme coins look good. (Favorite worst deals: 1) being pitched on municipal bonds backed only by revenue from future sewer charges for a development not yet built, and which never was. Junk municipal bonds are a thing. 2) a San Francisco strip club that did an IPO in the first dot-com boom and went bust. SEC CIK 931799.)
- MichaelZuo 2y ago
  One thing I don’t get about Hollywood accounting is how do they manage to get credible people/companies to sign off on their books year after year…? (Especially for those owned by listed companies) And how can the studios and various deal brokers apparently act as if GAAP, FASB, and the SEC don’t exist.
  - WorkerBee28474 2y ago
    They probably follow accounting rules to the letter.
  - wahern 2y ago
    1) The middle tiers aren't publicly traded companies, often single-member LLCs or small partnerships used as vehicles for funding just a handful of projects. In general, they're not easy to scrutinize. 2) I think most of the accounting magic has to do with deferring income, and attributing and allocating future earnings. The mechanics and guesswork is extremely niche; industry norms set the guardrails for what's reasonable. IOW, Hollywood gets to write the rules. 3) I suspect there's less tax cheating than people cynically expect. Mostly the game is about tax deferral, minimizing the blast radius of projects that tank, and everybody jockeying--and stabbing each other in the back--to maximize their share of the pie. I doubt the government loses much revenue. They might nominally get more revenue for a single cycle if accounting was tightened up, but then you might lose much of the dynamism and risk taking, reducing tax revenue long-term. Note: I have zero industry insight, though I once spoke with a former LA district IRS tax lawyer who seemed much more cynical about the shenanigans than what I presented above. And I got the sense that, like with Scientology and Donald Trump, the IRS has learned the hard way they don't have the wherewithal to win any serious litigation that threatens the status quo.
bluedino 2y ago
How could the people of Chicago possibly think a casino is going to improve things?
- tart-lemonade 2y ago
  It's not the people that matter, it's the politicians. They can say "it'll help fund our pensions without a tax increase or budget cuts" to quell the voters and have a much better chance at getting re-elected with all the contributions flowing to their campaigns. If the politicians really cared what their constituents thought or about the long-term financial health of the city, they wouldn't be leasing away our assets at firesale prices (like the Skyway and street parking). We need more people in government who care about good government like JB Pritzker, Alexi Giannoulias, or even our Parks superintendent Rosa Escareno.
- ameliaquining 2y ago
  As the article explains, the primary thing they'll hoping it'll improve is the city's tax base, given that broad-based tax hikes are politically unpalatable. This isn't wildly implausible.
- some_random 2y ago
  The people of Chicago only care about the streets being plowed and swept.
jgalt212 2y ago
I was hoping this was a long form piece on the O'Hare Spread. > make a huge trade on margin, which is essentially like betting with someone else’s money, and then he would go to O’Hare airport https://digitaledition.chicagotribune.com/tribune/article_popover.aspx?guid=d8279204-2b2f-40a7-ba83-0b8278f14f74 https://digitaledition.chicagotribune.com/tribune/article_po...
deleted 2y ago
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Raymond122 2y ago
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Raymond122 2y ago
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sedev 2y ago
An important part of the historical context here is that the black community in America has a lot of scar tissue around sketchy investment opportunities, and those scars go back, oh, call it 160 years (i.e. the Reconstruction era). When you have a community that is suffering from widespread generational poverty, as the black community in America broadly is, that community naturally tends to be very eager for opportunities for generating wealth — especially opportunities that present themselves as "This is it! This is your chance to buy into the American Dream, legitimately and officially, no messing around with crime, sports, or the music industry, you're going to have Investment Opportunities, you will be stockholders, this is what prudent people do to accumulate wealth and provide for their children & grandchildren." The black community in America has been presented with many such opportunities. How many of them were legitimate? Nobody has a really solid number, for hopefully obvious reasons, but whatever the real rate of legitimate opportunities that sound like the above is, it's low enough that 160-ish years of it have left the black community in America still suffering from widespread generational poverty. Particularly there is a pattern in economic-bubble periods where members of the black community buy in near the top (because the growth of a bubble is driven by existing capital flowing into it and the black community has less capital, while whatever activity is inflating the bubble seeks out large clumps of capital first, as any growing sector does), end up as bagholders (because they bought in near the top of a bubble), and suffer disproportionately (because they had less capital, and so a given absolute loss is a bigger percentage of their capital than for wealthier communities). There have also, of course, been periods of undisguised racial violence, which have always involved theft as one form the violence takes. All of this leaves the black community in America with noteworthy long-term scars around the topic of investment opportunities particularly marketed to them — and yet, what are they supposed to do, give up on pursuing the American Dream, especially when someone promises up and down that this is it, they can leave behind the sordid stuff, this truly is the pathway to affluence, safety, and respectability? I have never been to Chicago and I know nothing about Bally's. All I know is that while history rarely outright repeats itself, it quite often rhymes.
- quercusa 2y ago
  It's kind of disconcerting to see the "black establishment" (aldermen, churches, etc.) on board with this. Do they really think this is a good idea? Is it that they received enough donations to make them think so?
mk_stjames 2y ago
Two random things completely tangent to the article's main topic: 1. The bit at the end about the happenstance of having stock in "every hotel, airline, bank, and similar I use" as a chip to potentially use in a customer service escalation case is hilarious and yet a bit thought provoking.... and 2. I'd love to sit across a poker table from Patrick some day, however terrifying that may be.
dmurray 2y ago
> The market does not agree with this assessment. The entire market capitalization of Bally’s (NYSE: BALY) is, as of this writing, ~$1.5 billion. What’s the difference between the $50 million average imputed value of the other casinos and the $750 million imputed value of the Chicago casino? The $750 million is made up, that’s what. > This is somewhat elementary and handwavy napkin analysis of a complicated business which, like most casinos and hotels, is heavily levered with a complex capital stack. But the investment case gets smothered by a napkin. This analysis is not OK and Patrick should know better. A quick Google [0] says Bally's has $5 billion in outstanding debt. That brings the market value of its assets to $6.5 billion and the question becomes "What's the difference between the $400m imputed value of the other casinos and the $750m value of this one?" And that's the kind of difference which gets explained by things like, it has 2x the average square footage, or it's more modern, or how about, it's in a city where it will have a monopoly on casino gambling, not in Las Vegas where there are dozens of competitors. "A complex capital stack" isn't a good explanation for this analysis. It's a complex capital stack with one line item 3x the size of the only one considered. I don't disagree with the conclusion that this is not a good deal. A fairer way to do this would be a parallel offering of class B shares to sophisticated investors, with the same economic rights and full transferability, then give the black churchgoers a 20% discount when they buy the class A. But the fundamental analysis is bad enough to make the article untrustworthy. [0] https://companiesmarketcap.com/ballys-corp/total-debt/ https://companiesmarketcap.com/ballys-corp/total-debt/
- morgante 2y ago
  Yeah I personally think the valuation is the least egregious part. If they get sued, they’ll have a defense for how they arrived at that number. It’s not 10x off. The bigger problem is the terrible loan terms.
  - dmurray 2y ago
    You don't have to take the loan, though. I think I'd prefer to buy the $250 shares at the terrible loan terms than to buy the unleveraged shares at $25,000, which suggests that the loan adds value. The leveraged shares are essentially an option. If the casino way outperforms expectations, the shareholders will get a huge return on their money (100x return or more). If it meets expectations or loses money, they are out their $250. That fits the profile of what was asked for: if anyone gets very rich off this they want the community to share in the proceeds. Whether 11% "financing" cost is fair or not has very little to do with the cost of funds and everything to do with the volatility of the future returns. If there's any chance the casino doubles or triples or sextuples in value, those shares are very valuable - even though that chance would presumably be offset by a large chance of it becoming worthless. My biggest problem with this is the transfer pricing issues. Bally's has every incentive to route profits to its other corporate entities and a lot of legitimate opportunities to do so. > This is a constant risk of being the junior partner in a structure, particularly without an aligned senior partner who would be as adversely impacted by sharp operating as you would be. This would also be solved by issuing the second class of stock with the same economic rights. Some hedge funds get to invest in it, someone who can assess the appropriate discount to apply for being the junior partner. And if Bally's ever do screw the shareholders, they have the perfect parties for a lawsuit: a sophisticated, well-coordinated operator in partnership with a sympathetic plaintiff.
PaulRobinson 2y ago
Breaking it down as a TLDR, as this is quite a long article, written with (what I consider to be pleasant, others might not), flourish in terms of the prose: There is an "investment" opportunity to invest in a casino with the city limits of Chicago, that the city of Chicago feels will fix long-term budgetary mismanagement issues. In order to qualify for this investment, investors need to self-certify as a "Minority" (or woman), but no clear definition of "Minority" exists. This could be constitutionally illegal due to the city's involvement in segregating the opportunity. When digging a little deeper, it becomes clear this is not an opportunity to invest directly in a casino, but in an entity that has a 25% "economic interest" in an operating company that operates a casino. Disbursement of profits is controlled by the parent company (Bally's), that has 75% voting rights in the entity invested in, and manages and operates the operating company investors own 25% of. This means if the operating company owes the holding company all its profits for, say, "licensing" rights of IP (say, customer databases, or trademarks, and so on), there are no profits to distribute to the investors. This is a familiar ruse to those who know how companies offshore profits to tax-favourable locales. There are 1,000 slots open to invest, each worth $25k, valuing the company at exactly $1bn, but the parent company (that owns 75%, remember), despite owning more than a dozen other properties and resorts is valued at a total market cap of $1.5bn. This suggests that the market as a whole does not consider that investment slice worth $250m, because it does not value the other 75% at $750m. If an investor doesn't have $25,000 to buy a slot, they can invest just $250, with the remainder being made up with a no-recourse loan. The interest on this is marked up at 11% annually, compounded quarterly. The $250m needed to provide this financing this, has come from lending on which the operating company is paying ~5%. The prospectus states profits are unlikely for "3 to 5 years", assuming of course there are profits after "licensing fees" and so on, have been handled. This means the loan bought for $250 is likely to grow to $34k-$42k with interest. When (if?), dividends are issued to pay off the loan, the payments to pay off the interest may be considered by the IRS a taxable benefit. The prospectus agrees this is possible but "unlikely". So in a single line: you can pay $250 to create a possible tax bill on $18k that goes to the loan provider in 5 years time, and you may get your $250 back (and more), if the casino operator decides to pay that out through the goodness of their heart. And this is being supported - including through "roadshows" at churches attended mostly by African Americans - by the city itself, in a way that is predictably going to back-fire, and may be very illegal. SEC should take a look. Public-spirited lawyers who don't want to see some of the poorest communities in the country get ripped off should also take a look. If I was a Bally's shareholder, I'd be concerned that in a few years time, the company I'm a shareholder in is going to be embroiled in scandal and potentially a Supreme Court ruling.
robseed 2y ago
It is getting some skeptical coverage https://blockclubchicago.org/2025/01/24/ballys-chicago-wants-women-minorities-to-invest-in-new-casino-but-is-it-a-safe-bet/ https://blockclubchicago.org/2025/01/24/ballys-chicago-wants... but not enough, seems downright exploitative to me.
justanotherjoe 2y ago
wow i don't like the 'wink wink nudge nudge' very obvious racism against african americans in this article. A lot of pointed and extraneous details about various minorities (non-blacks) that fall squarely into very specific talking points. In fact the only minorities this article doesn't mention are african americans, despite very obviously talking about them. And don't tell me i'm reaching...It's called theory of mind. Kind of sad this has gotten so many points.
- laidoffamazon 2y ago
  Patrick has shown these views before but he’s more open about them now due to certain recent events. He just has a tendency to obfuscate to make himself look more intelligent and interesting. It is interesting that he pitches himself as a hero due to VaccinateCA (which I tried to use because I trusted him 4 years ago but was useless in my experience compared to my states megasite online queue) but has no interest in pointing out who the recent HHS Secretary designate is.

llimani 2y ago

[flagged]

jeffgreco 2y ago

Some truly hideous AI art on this one.

nfriedly 2y ago

Holy fuck that's a terrible deal they offered on the $250 shares! Made up billion-dollar valuation aside, an 11% interest rate on a $24,750 loan means that it's never going to pay for itself and start producing a return for the owner, even at casino-level profits.

deleted 2y ago
[deleted]
joezydeco 2y ago
Bally's built a temporary casino in Chicago while the official one is getting funded up and built. Because, you know, you can't let that gaming license just sit there and do nothing. Sadly the temporary casino is only taking about 60% of projected revenue so far. https://www.yogonet.com/international/news/2024/10/16/82112-ballys-chicago-casino-shows-progress-but-revenue-falls-short-of-projections https://www.yogonet.com/international/news/2024/10/16/82112-... Bally blames the location and lack of parking and yadda yadda yadda, but Illinoisans are just saturated with gambling options right now. The suburban casinos, the Indiana casinos, Wisconsin first-nations Bingo, Illinois Lotto, the multi-state lotteries, home-rule gaming in restaurants and bars, online sports betting...we still have horse racing here for crying out loud. And, oh yeah, weed is legal here.
- Loughla 2y ago
  One thing I noticed when I was last in Illinois is the absolutely amazing amount of slots "parlors". You can get a beer or something and they have 2 or 3 slot machines. They're everywhere. Like one out of every 10 businesses if I had to make up a number. And almost every gas station, bar, or restaurant has slot machines in them. What is happening in your state, Illinois?
  - smelendez 2y ago
    At least as of a few years ago, Illinois had the most of any state. https://features.propublica.org/the-bad-bet/how-illinois-bet-on-video-gambling-and-lost/ https://features.propublica.org/the-bad-bet/how-illinois-bet... And since they’re only allowed in certain municipalities (not Chicago, though you’ll see them around), you can sometimes drive down a road and see one side just lined with depressing slot machine parlors with names like Bob’s Lounge or Susie’s Cafe. That side is usually a poorer town that needs the revenue from the town on the other side, where the money is. I’m not sure why, but in my experience while those establishments nominally serve beer, liquor, coffee, soft drinks, and sometimes food, and are perfectly legal and open to the public, they do not seem at all welcoming to random people popping in who aren’t there to gamble. Or maybe they just don’t like my vibe. Perhaps some differ, but it’s a very different feeling than states like Louisiana or Nevada where lots of bars have gambling machines that are ignored by the majority of customers. It’s a shame, because I’m sure they’re crowding out other businesses, including regular bars and cafes that would serve a broader audience.
  - joezydeco 2y ago
    Two things: 1) The slots in bars and restaurants are a legitimization of the old video poker machines that the mob used to place in establishments. Can't beat 'em? Join 'em. https://www.gambling911.com/poker/video-poker-kingpin-gets-three-years-behind-bars-020812.html https://www.gambling911.com/poker/video-poker-kingpin-gets-t... That said, every town has the choice to allow them or not. They tend to fall like dominos when they see the revenue. I just saw a restaurant owner on Reddit say he made $100K profit last year, and the location's share is typically a third of the handle. 2) We're taxed so heavily on nearly everything it becomes incredibly easy to pitch additional gaming forms as "see, this will help fund schools!" or whatever cause is up next. Except we're gullible, never realizing that Lotto proceeds replace budgeted educational funds and not supplement them.

tedivm 2y ago

There's a lot of interesting stuff in here, but there's also a lot of garbage. Talking about the African American community in Chicago, but then using examples from LA to prove a point, is at best a horrible argument and at worst purposefully misleading. I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black. There are no pogroms happening here against people who aren't black, even if they do happen to own a business. This is just such a weird statement to have to make.

shigawire 2y ago
As with most Chicago critics, there are valid points to be made but it often feels too gleeful.
likeabatterycar 2y ago
> I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black. May I ask why? This seems like a deliberate choice. It is, at best, met with suspicion by other residents.
- readthenotes1 2y ago
  I'm pretty sure hen wasn't given a deliberate choice whether to be Black or not.
  - likeabatterycar 2y ago
    > Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith. Chicago is an extremely segregated city. In segregated cities, there is a nuanced thought process one must undergo to move into an area where you are considered an outsider. In Seattle for example, the tech community is overall reviled for having gentrified the Central District, where historically black areas were bulldozed to erect overpriced cardboard apartments for tech plebes. This is a legitimate question.
    - 2y ago

mplewis 2y ago

[flagged]

yesfitz 2y ago
I agree. AI images communicate "low effort" at best and "untrustworthy" at worst, neither of which remotely describe Bits about Money.
ryukoposting 2y ago
I agree. I don't know why so many blogs feel the need to plaster disfigured AI-generated garbage across the tops of their posts now. What does this ugly picture add to the post? A little pagerank cred? 3 inches of shit I have to scroll past, increasing "engagement?" It certainly isn't adding anything to the quality of the content.
Spivak 2y ago
I think it's an interesting sign of the times when people are asking for stock images. To me the AI art is a marginal improvement over stock photos since they're plausibly unique and can be tailored somewhat more specifically to the article's content. Neither option is great, but we are talking about the digital equivalent of hotel art so the bar is pretty low. At least the author themselves had some input on the splash image compared to a stock photo.
- mst 2y ago
  I'm (genuinely) fascinated by people having opinions about the splash image at all. When I click through to an article my first action is to PgDn past it without even registering the image, be it a photo (on a 'normal' new site), stock, or generated. If I actually try and think about it, I also marginally prefer AI because of the content tailoring thing, and thought the different elements that were coaxed out of the generator in this case were kinda neat. But people forming opinions about trustworthiness from the image is entirely alien to me (this is not to say they're wrong to do so, I simply ... don't).

adrianparsons 2y ago

This was an aside at the end of the article, but what an interesting strategy: I bought the stock for the same reason I buy stock in every hotel, airline, bank, and similar I use: in the unlikely event a not-particularly-high-stakes poker player has a routine customer service complaint, Investor Relations is available as an escalation strategy, over e.g. hotel staff who might be long-since inured to listening to complaints from people who lost money in a casino.

pc86 2y ago
I'm sure this works if you're buying a couple thousand shares at a time but I don't think buying 10 shares of Southwest is going to make them listen to you any more or less when you have an issue on your flight.
- wging 2y ago
  I think the idea is to take advantage of certain legal obligations that are triggered by ownership of any size.
  - plagiarist 2y ago
    Could you give some examples? I have no idea what legal differences would provide a benefit during customer interactions.
    - tptacek 2y ago
      Has nothing to do with legal differences. It's just a different customer service team you end up talking to. It's in the same class of tricks as knowing the precise set of prompts to give to get immediately to a human operator when you call the main line.
- pie_flavor 2y ago
  It doesn't matter whether they actually value you any more. The point is that investor relations is staffed by competent people, as opposed to customer service which is staffed by incompetent people as an intentional matter of efficient human capital allocation. So you can get much more reliable help if you can present the right class signals, and if you are at least theoretically allowed to call that line.

Animats 2y ago

I've seen worse deals offered in prospectuses. But not often. Having two tiers of stock with the insiders having the control shares used to be prohibited by the New York Stock Exchange. Now it's common. Google and Facebook are set up that way, so they have presidents for life. So are some lesser companies which really need to fire the CEO but can't. Then, what you're buying into is not the operating entity. It's just a holding company. Not even the parent holding company that owns many casinos; that's BALY. It's a holding company in the middle, one whose returns are totally determined by the other parts of the stack. This is much like film investing, where you can buy an interest in "Silver Screen Partners IV" and get a share of the profits from a specific film. Except that the studio and the film producer control the accounting between related entities. Those deals are generally a lose, although you get to go to the premier and meet the cast. And then there's the leverage. When you buy in, you're under water, and may stay there. Can't speak to the tax consequences. This is so awful it makes meme coins look good. (Favorite worst deals: 1) being pitched on municipal bonds backed only by revenue from future sewer charges for a development not yet built, and which never was. Junk municipal bonds are a thing. 2) a San Francisco strip club that did an IPO in the first dot-com boom and went bust. SEC CIK 931799.)

MichaelZuo 2y ago
One thing I don’t get about Hollywood accounting is how do they manage to get credible people/companies to sign off on their books year after year…? (Especially for those owned by listed companies) And how can the studios and various deal brokers apparently act as if GAAP, FASB, and the SEC don’t exist.
- WorkerBee28474 2y ago
  They probably follow accounting rules to the letter.
- wahern 2y ago
  1) The middle tiers aren't publicly traded companies, often single-member LLCs or small partnerships used as vehicles for funding just a handful of projects. In general, they're not easy to scrutinize. 2) I think most of the accounting magic has to do with deferring income, and attributing and allocating future earnings. The mechanics and guesswork is extremely niche; industry norms set the guardrails for what's reasonable. IOW, Hollywood gets to write the rules. 3) I suspect there's less tax cheating than people cynically expect. Mostly the game is about tax deferral, minimizing the blast radius of projects that tank, and everybody jockeying--and stabbing each other in the back--to maximize their share of the pie. I doubt the government loses much revenue. They might nominally get more revenue for a single cycle if accounting was tightened up, but then you might lose much of the dynamism and risk taking, reducing tax revenue long-term. Note: I have zero industry insight, though I once spoke with a former LA district IRS tax lawyer who seemed much more cynical about the shenanigans than what I presented above. And I got the sense that, like with Scientology and Donald Trump, the IRS has learned the hard way they don't have the wherewithal to win any serious litigation that threatens the status quo.

bluedino 2y ago

How could the people of Chicago possibly think a casino is going to improve things?

tart-lemonade 2y ago
It's not the people that matter, it's the politicians. They can say "it'll help fund our pensions without a tax increase or budget cuts" to quell the voters and have a much better chance at getting re-elected with all the contributions flowing to their campaigns. If the politicians really cared what their constituents thought or about the long-term financial health of the city, they wouldn't be leasing away our assets at firesale prices (like the Skyway and street parking). We need more people in government who care about good government like JB Pritzker, Alexi Giannoulias, or even our Parks superintendent Rosa Escareno.
ameliaquining 2y ago
As the article explains, the primary thing they'll hoping it'll improve is the city's tax base, given that broad-based tax hikes are politically unpalatable. This isn't wildly implausible.
some_random 2y ago
The people of Chicago only care about the streets being plowed and swept.

jgalt212 2y ago

I was hoping this was a long form piece on the O'Hare Spread. > make a huge trade on margin, which is essentially like betting with someone else’s money, and then he would go to O’Hare airport https://digitaledition.chicagotribune.com/tribune/article_popover.aspx?guid=d8279204-2b2f-40a7-ba83-0b8278f14f74 https://digitaledition.chicagotribune.com/tribune/article_po...

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Raymond122 2y ago

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Raymond122 2y ago

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sedev 2y ago

An important part of the historical context here is that the black community in America has a lot of scar tissue around sketchy investment opportunities, and those scars go back, oh, call it 160 years (i.e. the Reconstruction era). When you have a community that is suffering from widespread generational poverty, as the black community in America broadly is, that community naturally tends to be very eager for opportunities for generating wealth — especially opportunities that present themselves as "This is it! This is your chance to buy into the American Dream, legitimately and officially, no messing around with crime, sports, or the music industry, you're going to have Investment Opportunities, you will be stockholders, this is what prudent people do to accumulate wealth and provide for their children & grandchildren." The black community in America has been presented with many such opportunities. How many of them were legitimate? Nobody has a really solid number, for hopefully obvious reasons, but whatever the real rate of legitimate opportunities that sound like the above is, it's low enough that 160-ish years of it have left the black community in America still suffering from widespread generational poverty. Particularly there is a pattern in economic-bubble periods where members of the black community buy in near the top (because the growth of a bubble is driven by existing capital flowing into it and the black community has less capital, while whatever activity is inflating the bubble seeks out large clumps of capital first, as any growing sector does), end up as bagholders (because they bought in near the top of a bubble), and suffer disproportionately (because they had less capital, and so a given absolute loss is a bigger percentage of their capital than for wealthier communities). There have also, of course, been periods of undisguised racial violence, which have always involved theft as one form the violence takes. All of this leaves the black community in America with noteworthy long-term scars around the topic of investment opportunities particularly marketed to them — and yet, what are they supposed to do, give up on pursuing the American Dream, especially when someone promises up and down that this is it, they can leave behind the sordid stuff, this truly is the pathway to affluence, safety, and respectability? I have never been to Chicago and I know nothing about Bally's. All I know is that while history rarely outright repeats itself, it quite often rhymes.

quercusa 2y ago
It's kind of disconcerting to see the "black establishment" (aldermen, churches, etc.) on board with this. Do they really think this is a good idea? Is it that they received enough donations to make them think so?

mk_stjames 2y ago

Two random things completely tangent to the article's main topic: 1. The bit at the end about the happenstance of having stock in "every hotel, airline, bank, and similar I use" as a chip to potentially use in a customer service escalation case is hilarious and yet a bit thought provoking.... and 2. I'd love to sit across a poker table from Patrick some day, however terrifying that may be.

dmurray 2y ago

> The market does not agree with this assessment. The entire market capitalization of Bally’s (NYSE: BALY) is, as of this writing, ~$1.5 billion. What’s the difference between the $50 million average imputed value of the other casinos and the $750 million imputed value of the Chicago casino? The $750 million is made up, that’s what. > This is somewhat elementary and handwavy napkin analysis of a complicated business which, like most casinos and hotels, is heavily levered with a complex capital stack. But the investment case gets smothered by a napkin. This analysis is not OK and Patrick should know better. A quick Google [0] says Bally's has $5 billion in outstanding debt. That brings the market value of its assets to $6.5 billion and the question becomes "What's the difference between the $400m imputed value of the other casinos and the $750m value of this one?" And that's the kind of difference which gets explained by things like, it has 2x the average square footage, or it's more modern, or how about, it's in a city where it will have a monopoly on casino gambling, not in Las Vegas where there are dozens of competitors. "A complex capital stack" isn't a good explanation for this analysis. It's a complex capital stack with one line item 3x the size of the only one considered. I don't disagree with the conclusion that this is not a good deal. A fairer way to do this would be a parallel offering of class B shares to sophisticated investors, with the same economic rights and full transferability, then give the black churchgoers a 20% discount when they buy the class A. But the fundamental analysis is bad enough to make the article untrustworthy. [0] https://companiesmarketcap.com/ballys-corp/total-debt/ https://companiesmarketcap.com/ballys-corp/total-debt/

morgante 2y ago
Yeah I personally think the valuation is the least egregious part. If they get sued, they’ll have a defense for how they arrived at that number. It’s not 10x off. The bigger problem is the terrible loan terms.
- dmurray 2y ago
  You don't have to take the loan, though. I think I'd prefer to buy the $250 shares at the terrible loan terms than to buy the unleveraged shares at $25,000, which suggests that the loan adds value. The leveraged shares are essentially an option. If the casino way outperforms expectations, the shareholders will get a huge return on their money (100x return or more). If it meets expectations or loses money, they are out their $250. That fits the profile of what was asked for: if anyone gets very rich off this they want the community to share in the proceeds. Whether 11% "financing" cost is fair or not has very little to do with the cost of funds and everything to do with the volatility of the future returns. If there's any chance the casino doubles or triples or sextuples in value, those shares are very valuable - even though that chance would presumably be offset by a large chance of it becoming worthless. My biggest problem with this is the transfer pricing issues. Bally's has every incentive to route profits to its other corporate entities and a lot of legitimate opportunities to do so. > This is a constant risk of being the junior partner in a structure, particularly without an aligned senior partner who would be as adversely impacted by sharp operating as you would be. This would also be solved by issuing the second class of stock with the same economic rights. Some hedge funds get to invest in it, someone who can assess the appropriate discount to apply for being the junior partner. And if Bally's ever do screw the shareholders, they have the perfect parties for a lawsuit: a sophisticated, well-coordinated operator in partnership with a sympathetic plaintiff.

PaulRobinson 2y ago

Breaking it down as a TLDR, as this is quite a long article, written with (what I consider to be pleasant, others might not), flourish in terms of the prose: There is an "investment" opportunity to invest in a casino with the city limits of Chicago, that the city of Chicago feels will fix long-term budgetary mismanagement issues. In order to qualify for this investment, investors need to self-certify as a "Minority" (or woman), but no clear definition of "Minority" exists. This could be constitutionally illegal due to the city's involvement in segregating the opportunity. When digging a little deeper, it becomes clear this is not an opportunity to invest directly in a casino, but in an entity that has a 25% "economic interest" in an operating company that operates a casino. Disbursement of profits is controlled by the parent company (Bally's), that has 75% voting rights in the entity invested in, and manages and operates the operating company investors own 25% of. This means if the operating company owes the holding company all its profits for, say, "licensing" rights of IP (say, customer databases, or trademarks, and so on), there are no profits to distribute to the investors. This is a familiar ruse to those who know how companies offshore profits to tax-favourable locales. There are 1,000 slots open to invest, each worth $25k, valuing the company at exactly $1bn, but the parent company (that owns 75%, remember), despite owning more than a dozen other properties and resorts is valued at a total market cap of $1.5bn. This suggests that the market as a whole does not consider that investment slice worth $250m, because it does not value the other 75% at $750m. If an investor doesn't have $25,000 to buy a slot, they can invest just $250, with the remainder being made up with a no-recourse loan. The interest on this is marked up at 11% annually, compounded quarterly. The $250m needed to provide this financing this, has come from lending on which the operating company is paying ~5%. The prospectus states profits are unlikely for "3 to 5 years", assuming of course there are profits after "licensing fees" and so on, have been handled. This means the loan bought for $250 is likely to grow to $34k-$42k with interest. When (if?), dividends are issued to pay off the loan, the payments to pay off the interest may be considered by the IRS a taxable benefit. The prospectus agrees this is possible but "unlikely". So in a single line: you can pay $250 to create a possible tax bill on $18k that goes to the loan provider in 5 years time, and you may get your $250 back (and more), if the casino operator decides to pay that out through the goodness of their heart. And this is being supported - including through "roadshows" at churches attended mostly by African Americans - by the city itself, in a way that is predictably going to back-fire, and may be very illegal. SEC should take a look. Public-spirited lawyers who don't want to see some of the poorest communities in the country get ripped off should also take a look. If I was a Bally's shareholder, I'd be concerned that in a few years time, the company I'm a shareholder in is going to be embroiled in scandal and potentially a Supreme Court ruling.

robseed 2y ago

It is getting some skeptical coverage https://blockclubchicago.org/2025/01/24/ballys-chicago-wants-women-minorities-to-invest-in-new-casino-but-is-it-a-safe-bet/ https://blockclubchicago.org/2025/01/24/ballys-chicago-wants... but not enough, seems downright exploitative to me.

justanotherjoe 2y ago

wow i don't like the 'wink wink nudge nudge' very obvious racism against african americans in this article. A lot of pointed and extraneous details about various minorities (non-blacks) that fall squarely into very specific talking points. In fact the only minorities this article doesn't mention are african americans, despite very obviously talking about them. And don't tell me i'm reaching...It's called theory of mind. Kind of sad this has gotten so many points.

laidoffamazon 2y ago
Patrick has shown these views before but he’s more open about them now due to certain recent events. He just has a tendency to obfuscate to make himself look more intelligent and interesting. It is interesting that he pitches himself as a hero due to VaccinateCA (which I tried to use because I trusted him 4 years ago but was useless in my experience compared to my states megasite online queue) but has no interest in pointing out who the recent HHS Secretary designate is.