Sands China tumbles 10 percent in Hong Kong debut

AP News
Posted: Nov 30, 2009 7:11 AM

Las Vegas Sands Corp.'s Macau operation tumbled 10 percent in its first day of Hong Kong trade Monday, after raising $2.5 billion in an initial public offering to help restart its languishing gambling projects.

Shares of Sands China Ltd. closed at 9.32 Hong Kong dollars after trading as low as HK$8.78. The stock had been sold at HK$10.38, near the low end of a range of prices it was marketed at.

The U.S. casino giant had originally sought to raise more than $3.3 billion by selling shares in its casino businesses in the southern Chinese enclave of Macau, the world's largest gambling market.

Much of its IPO proceeds will go toward paying back Las Vegas Sands' massive debts. About $500 million will be used to resume work on multibillion dollar projects Sands temporarily abandoned last year because of a funding squeeze.

Sands Chairman Sheldon Adelson dismissed worries about the stock's initial performance.

"We're not in business for 10 minutes, we're in business for decades," he told reporters at Hong Kong's stock exchange shortly after his company's stock tanked.

Analysts said Monday's tepid debut was partly the result of the high price Sands was valuing its Macau operation.

Concerns about growth and saturation in the city's casino market, as well as waning interest in new offerings after a string of recent IPOs, including one from Sands rival Wynn Resorts, also weighed.

New casino openings in Macau's Cotai area, where Sands operates its colossal Venetian resort and is planning its other projects, "will drag down the profitability of all casinos there significantly," Credit Suisse analyst Gabriel Chan wrote in a research note. He said he expects the company's stock to lag the broader market.

"This presents a great challenge to Sands China, given its already tight balance sheet," he said.

The casino industry in Macau, the one place in China were gambling is legal, enjoyed years of dizzying growth before last year's slowdown. It has rebounded this year thanks partly to China's quick recovery from the global economic downturn.