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Icahn’s Tropicana Entertainment: The Gaming Company

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About Tropicana Entertainment

Icahn Enterprises (IEP) owns 68% of the outstanding stock of Tropicana Entertainment through Icahn Enterprises Holding LP (IEH). IEP has a 99% limited partnership interest in IEH and a 1% interest through Icahn Enterprises GP Inc.

Tropicana (TPCA) is a publicly traded gaming company that has had a successful track record since 2000. Through its subsidiaries, it owns and operates eight casinos and resorts in Indiana, Louisiana, Mississippi, Nevada, New Jersey, Aruba, and Missouri. Tropicana employs approximately 7,800 people, and it has nearly 5,500 rooms, 8,100 slot positions, and 280 table games.

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Casino and gaming industry in the US

The casino and gaming industry is a significant contributor to the economy of the United States. Casino revenues are significantly affected by the state of the economy and the consumer’s discretionary spending power. The recession contributed to revenue declines in this industry.

The threat from a new entrant is weak because setting up a casino requires massive initial investments and stringent licensing and insurance requirements. There is a high level of competition among the existing players in the industry.

The main opportunity for the casino industry is expansion in the online environment, which can offer worldwide access to a casino. Innovation in products and services is the key factor for the success in the casino and gaming industry.

Market share of gaming companies

Macao makes ten times more revenue per visitor than Las Vegas. According to 2012 statistics, Macao’s gaming revenue per visitor was $1,354 as compared to $156 for Las Vegas.

Major gaming companies like Wynn Resorts (WYNN), MGM Resorts (MGM), and Las Vegas Sands (LVS) are a part of the VanEck Vectors Global Gaming ETF (BJK).

On a year-to-date basis, Wynn Resorts, MGM Resorts, and Las Vegas Sands (LVS) gave returns of -25%, 3%, and -10%, respectively. BJK was down by 7% during the same period.

From April 2015 to April 2016, Icahn Enterprises (IEP) fell by ~33% in comparison to the SPDR S&P 500 ETF (SPY), which fell by 1% during the same period.

Is IEP’s Gaming segment growing? Read on to learn more.

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