Bally’s minority IPO for Chicago casino nixed by SEC
Bally’s Corporation has recently suspended its ambitious $250 million (£196.8 million/€238.4 million) initial public offering (IPO) for its permanent Chicago casino due to a lack of response from the Securities and Exchange Commission (SEC) regarding the proposal.
On Thursday, February 27, Bally’s chairman Soo Kim conveyed to the Chicago Tribune that the SEC failed to declare the registration effective within the required time frame. This delay rendered the prospectus financials outdated, causing the development to “go stale,” according to Kim. The IPO was initially anticipated to close on February 7.
In light of the stalled IPO, Bally’s plans to issue refunds to depositors and reassess its strategies moving forward. When Bally’s secured the exclusive casino license from the city in 2022, it entered into a host community agreement mandating that 25% of the project equity must be owned by minority individuals and minority-controlled businesses. This raises questions about how the company will meet this obligation amidst the current standstill.
In its IPO prospectus filed with the SEC, Bally’s highlighted potential uncertainties regarding the investment program, warning that failure to proceed with the IPO could lead to the termination of the host community agreement.
Bally’s has yet to respond to inquiries regarding the current status of its obligations, but the company’s fourth-quarter earnings report and conference call are scheduled for tomorrow, March 5.
“It was disappointing for the SEC to not respond,” Kim stated to the Tribune. “We will return, update our financials, and refile, but we remain uncertain about the lack of communication this first time, and there’s no guarantee of a response the next time.”
Overview of IPO Rollout
The IPO initiative was first disclosed on December 30 and was set to be valued at up to $250 million, segmented into four share classes ranging from $250 to $25,000. Shares were specifically allocated to residents of Illinois, New York, Texas, and Florida who meet minority status qualifications.
This minority designation encompasses African-Americans, Hispanics, Asian-Americans, Native Americans, and any individuals identified by the City of Chicago as socially disadvantaged due to experiences of racial or ethnic prejudice or cultural bias. The deadline for applications was January 31, with applicants receiving notification on February 28, allowing them to withdraw any deposited funds.
Ongoing Discrimination Lawsuit Against Bally’s
While the IPO is currently on hold, a related lawsuit persists. Filed on January 29 in the U.S. District Court for the Northern District of Illinois, the lawsuit is brought by two Texas residents who allege that the IPO’s structure is discriminatory and unconstitutional.
Phillip Aronoff and Richard Fisher claim they were “ready and willing” to invest but are barred due to their race. Although a federal judge declined to halt the IPO via injunction in February, the case remains active.
Loop Capital, the underwriting firm involved with the IPO, previously stated that it would not verify the race or sex of applicants. However, attorney Daniel Lennington, representing the plaintiffs, asserted to Block Club Chicago last month that Bally’s verification process does indeed involve checking applicants’ race and sex, indicating that those who answer “no” are not eligible.
Bally’s Corporation’s current challenges reflect broader trends and regulatory complexities within the gambling sector. As the industry evolves, the significance of compliance with equity requirements and regulatory obligations becomes increasingly critical for operators.
