Risky Hand
Gambling stocks lose luster
Since it opened on Memorial Day weekend, Resorts International's casino in Atlantic City, has been a greenback gusher, grossing $119.3 million--a take bigger than that of any Nevada gambling house. But last week it seemed as if the well might run dry. New Jersey Attorney General John Degnan issued a 115-page report urging that Resorts be denied a permanent gambling license when its temporary permit expires Feb. 25.
Resorts President I.G. ("Jack") Davis attacked the report, contending that it is a rehash of old, unfounded charges. It accused the company of ties to organized crime, faulty accounting, inadequate information about gambling junkets and the purchase of a key employee's silence with a ten-year, $350,000 consulting contract.
On the American Exchange, Resorts had been a Wunderstock that had risen as high as $69.50 a share this summer. But after the report came out, it dropped almost eight points, closing the week at $23.62. The shares did not take more of a drubbing because even a negative ruling from the Casino Control Commission, which plans to begin hearings next month on granting Resorts a permanent license, could put several hundred million dollars in the company treasury. If Resorts lost its license, a state-appointed "conservator" would sell the casino and turn over the money to Resorts. The sale price would probably be at least twice as much as the company's $40 million investment in the gambling palace.
The problems of Resorts stand to hurt other gaming companies that are planning to open casinos in Atlantic City. Applicants will now get especially close and careful scrutiny, and many openings will be delayed. This may well put a temporary crimp in the earnings and stock prices of such companies as Bally, Caesars World and Golden Nugget. As for Resorts, the betting on the Boardwalk is that the commission will vote as it has in the past: 4 to 1 in favor of a license.
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