Gate City owns 8.8%. Increased position from 359,836 shares in Q1 to 443,559 in Q2. Insiders own 34%. Black Diamond owns 16.8%. Gabelli owns 11.2%. Sale??
I came to the same conclusion waterboy. 16/20 is not a great discount for a company with these cash flows, that is in secular decline and getting crushed by regulators and the tribes at each step.
I live in MN and have been to Canterbury Park many times over the years. I would be shocked if the legislature ever allows slots or anything close to it at Canterbury. The Native American casinos openly brag about having ownership of many votes in St. Paul on both parties. The next possible window for that to change might be the 2026 election, however, there isn't likely to be enough owned members of the legislature voted out. I would recommend thinking about the stock without the added revenue ever arriving due to our corrupt state.
We are a fairly puritanical state. Just legalized sunday liquor sales recently. Sports betting is unlikely unless the state is VERY cash strapped. Even then the tribes would get preference.
And more and more people are gambling elsewhere. Horse-racing is in secular decline. There are now hundreds of ways to gamble in ways that are a lot more fun.
The card room recently had its high stakes card table limit one upped by neighboring mystic lake. A cleaner and more popular casino. This Means less whales and less profits for their main money maker segment.
The bet here is that they monetize their "hidden" assets within 2 years, the stock rerates or dividends and you get out ASAP.
I think there's no doubt that IF Canterbury was allowed to do more betting/sports betting, this stock would materially go up. Certainly makes sense from that standpoint.
Sports gambling has an uphill battle here in MN. It's ridiculous it hasn't been made legal yet.
Thanks for the interesting write-up, and apologies for being late to the party.
I approached the business a bit differently. If you take the book value of their non-PP&E balance sheet assets (TIFs, JVs, etc.) and then apply conservative valuations to the real estate - using a combination of realized monetizations, tax-assessed values, and local transaction comps - you can pretty easily get to an attractive margin of safety even while valuing the operations at zero.
I’m ultimately not in the game of predicting what the legislature in St. Paul is going to do, and it seems like the expected FCF from the operations is more or less the opportunity cost of not simply leasing out the real estate.
To me, it basically looks like a way to own a real estate portfolio in a growing suburb of Minneapolis at an attractive discount, with an embedded call option on MN gaming laws. At today’s discount, the math suggests Randy doesn’t need to earn outsized returns on incremental capital to deliver an attractive “levered” yield. There don’t seem to be many ways to lose, and there are plenty of ways this could play out over the next decade that put money back in my pocket - even if those paths aren’t obvious today (and if they were, the discount probably wouldn’t exist). And even if it takes a long time for a realization, the yield you’re effectively earning on the discount should be adequate compensation while you wait.
I came to the same conclusion waterboy. 16/20 is not a great discount for a company with these cash flows, that is in secular decline and getting crushed by regulators and the tribes at each step.
I live in MN and have been to Canterbury Park many times over the years. I would be shocked if the legislature ever allows slots or anything close to it at Canterbury. The Native American casinos openly brag about having ownership of many votes in St. Paul on both parties. The next possible window for that to change might be the 2026 election, however, there isn't likely to be enough owned members of the legislature voted out. I would recommend thinking about the stock without the added revenue ever arriving due to our corrupt state.
We are a fairly puritanical state. Just legalized sunday liquor sales recently. Sports betting is unlikely unless the state is VERY cash strapped. Even then the tribes would get preference.
And more and more people are gambling elsewhere. Horse-racing is in secular decline. There are now hundreds of ways to gamble in ways that are a lot more fun.
The card room recently had its high stakes card table limit one upped by neighboring mystic lake. A cleaner and more popular casino. This Means less whales and less profits for their main money maker segment.
The bet here is that they monetize their "hidden" assets within 2 years, the stock rerates or dividends and you get out ASAP.
A Lot of unlikely "shots on goal" here.
Thanks for your thoughts. Sports betting seems unlikely too
I think there's no doubt that IF Canterbury was allowed to do more betting/sports betting, this stock would materially go up. Certainly makes sense from that standpoint.
Sports gambling has an uphill battle here in MN. It's ridiculous it hasn't been made legal yet.
Thanks for the interesting write-up, and apologies for being late to the party.
I approached the business a bit differently. If you take the book value of their non-PP&E balance sheet assets (TIFs, JVs, etc.) and then apply conservative valuations to the real estate - using a combination of realized monetizations, tax-assessed values, and local transaction comps - you can pretty easily get to an attractive margin of safety even while valuing the operations at zero.
I’m ultimately not in the game of predicting what the legislature in St. Paul is going to do, and it seems like the expected FCF from the operations is more or less the opportunity cost of not simply leasing out the real estate.
To me, it basically looks like a way to own a real estate portfolio in a growing suburb of Minneapolis at an attractive discount, with an embedded call option on MN gaming laws. At today’s discount, the math suggests Randy doesn’t need to earn outsized returns on incremental capital to deliver an attractive “levered” yield. There don’t seem to be many ways to lose, and there are plenty of ways this could play out over the next decade that put money back in my pocket - even if those paths aren’t obvious today (and if they were, the discount probably wouldn’t exist). And even if it takes a long time for a realization, the yield you’re effectively earning on the discount should be adequate compensation while you wait.
https://substack.com/@investing501/p-173092995
My thoughts from last month
Thanks!