Eldorado Resorts’ CEO and other high-ranking officials in the Reno-based casino company have been subpoenaed by the Securities and Exchange Commission.
In a Tuesday regulatory filing, Eldorado disclosed that CEO Tom Reeg, chief operating officer and president Anthony Carano, executive chairman Gary Carano and board member James Hawkins had received subpoenas in May relating to an ongoing investigation of the executives trading in an undisclosed company tied to Hawkins.
The announcement comes as Eldorado is preparing to acquire Caesars Entertainment Corp. for $17 billion, but experts say the subpoenas are unlikely to have any major impact on the deal.
A good track record
According to the SEC filing, the Eldorado executives traded stock in a company where Hawkins also served as a board member. The SEC filing did not disclose the company’s name.
In addition to Eldorado, Hawkins serves as a board member for IRadimed Corp. and OSI Systems Inc. Neither company returned requests for comment. Eldorado spokeswoman Caroline Coyle also did not return requests for comment. Caesars spokespeople declined to comment.
Eldorado disclosed the subpoena to Caesars Entertainment Corp. in June, according to the filing, and representatives told Caesars representatives that the executives “had not been notified of any allegation of wrongdoing.”
With so few details about the trading, Jefferies analyst David Katz said it’s hard to judge the executives’ actions.
“The track record of Eldorado so far has been quite good,” he said.
Katz said it’s unlikely the subpoenas will impact Eldorado’s plans to purchase Caesars.
Even after Caesars became aware of the subpoenas, the company decided they were “not material enough” to hold off the deal, Katz said.
ROTH Capital Partners analyst David Bain also doesn’t expect the subpoenas to be an issue for the deal. He pointed out in a note Wednesday that New Jersey approved Eldorado’s acquisition of the Tropicana Atlantic City and licensed Reeg one month after they had been made aware of the SEC inquiry.
“We believe this demonstrates the forward path of New Jersey and other regulatory approvals needed for the (Caesars-Eldorado merger to close in 2020),” he said. “Checks cite that the SEC has not followed up for interview requests.”
Bain added that Caesars and Carl Icahn, the company’s largest shareholder, likely already checked the issue with multiple law firms and saw no issue moving forward, and said Reeg’s activity with the company was likely a 2016 trade with a minimum amount around $15,000.
While Katz classified the subpoena as immaterial, he said it could hurt Eldorado’s stock down the road.
“I don’t know how much we will ever learn about what did or didn’t happen,” he said. “Matters such as this can hang around without ever achieving public disclosure. I suppose that’s what I view as a hindrance for the stock.”