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Thread: Help me understand this .

  1. #1
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    Default Help me understand this .

    As some of you may know Harrah's Ent. was offered a 15.5 billion buyout recently . This would give the shareholders $ 83.50 per share . Now Harrahs has a possible plan B they are talking about a leveraged recapitalzation plan . So I guess what that means is Harrahs would borrow money and buy back shares to create shareholder value ,that exceeded the highest bid . Now my question is this : Which plan would make more money for a shareholder ? And if they borrow money for this does this create more debt for the company thus creating less value for investors ? I really want to get out of this stock within a couple of years as it makes me nervous atm . Btw I have 2,500 shares of this stock in a 401k but since I have not worked for the company for two years I cant move it very easily .

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    Banned Melonie's Avatar
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    Default Re: Help me understand this .

    It certainly sounds like a 'long term' play where Harrahs wants to reduce their stock's 'public exposure', using 'cheap' credit (probably a bond issue) to take shares off the market. This would indeed increase the market price of the remaining shares by some measure ... however that measure would depend on the actual effects of that new and ongoing 'cheap' credit (bond interest) expense on Harrah's bottom line. If earnings drop significantly as a result of the new 'cheap' credit (bond interest) expense, the E will drop immediately and the P will drop as well as soon as quarterly numbers are released. Whether or not the P increase that occurs as a result of Harrah's share buyback gets cancelled out by future drops in E as a result of the new 'cheap' credit (bond interest) expense, your crystal ball is as cloudy as everyone else's.

    The one sure result where Harrah's is concerned is that the outstanding shares owned and/or controlled by corporate officers, good ol' boy buddies etc. will comprise a higher percentage of total shares once some number of 'public' shares are bought back and placed in the company treasury. Stockholders vote, bondholders don't !

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    Banned Katrine's Avatar
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    Default Re: Help me understand this .

    Rollover your 401K into a T-IRA. There is absolutely no reason to have an old 401k sitting somewhere you aren't participating in!!!! Then you can just SELL the fucker and stop worrying!

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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    Default Re: Help me understand this .

    Ya I want to get out of this but if you have been reading there is high speculation of a buy-out and the bid has been going up Woo-Hoo ! Possible $90 per share , once this fiasco has ended the money is outta there !

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    Default Re: Help me understand this .

    ^^^ agreed that 'LBO's, mergers and acquisitions' are still the order of the day, due to the historically very low interest rates available as well as the fact that many corporations are sitting on fat profits from the past couple of years that need to be 'spent' before they wind up being taxed. I had a similar deal occur with my Glamis Gold shares, which more than tripled over the two years I had owned them ... with most of that gain being the result of an LBO by Goldcorp last August.

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    Default Re: Help me understand this .

    well, you got what you were waiting for ... a $90 a share buyout offer !!!



    If you can trade first thing tomorrow (before LBO emotions revert to financial common sense) you'll most likely get the best price possible.

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    Default Re: Help me understand this .

    I am surprised there are no poisoned pills in there someplace. For such a cash rich business it seems like they would protect themselves in some way.

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    Default Re: Help me understand this .

    ^^^ per , my guess is that Harrah's corporate management will be 'extremely well taken care of' by additional means other than being paid for their stock shares !!!

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    Default Re: Help me understand this .

    I am calling my Moms acct today and see what he would like to do with my 401 . The CEO is Gary Loveman - Before his employment with Harrah's he was a Professor at Harvard Business School - so he's got skills , plus he's really a young guy with a lot of new world ideas .

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