The Chicago casino aspirations of Bally might be derailed by an opportunity for minority investment.

So far, there have been several snags with Bally's $1.7 billion (£1.36 billion/€1.65 billion) permanent Vegas casino complex. However, the company's development deal with the city could be jeopardised by a new lawsuit that is linked to its minority investment proposal.

Final confirmation of the start of Bally's previously announced minority investment program for its permanent Chicago casino came in late December. In 2022, the city's only casino licence could only be obtained after the completion of the program. According to a host community agreement, "minority individuals and minority owned and controlled businesses" are required to own 25% of the project equity.

The operator announced a $250 million share sale to assist with loan repayments as part of the launch. Four different share "classes" ranging from $250 to $25,000 are available on the program. Illinois, New York, Texas, and Florida individuals who identify as women or minorities were given the opportunity to own shares.

Anyone "found by the City of Chicago to be socially disadvantaged by having suffered racial or ethnic prejudice or cultural bias within American society" is added to the list, which includes African-Americans, Hispanics, Asian-Americans, Native Americans, and any other qualified group. The deadline for submissions was January 31st.

Two white Texans, Phillip Aronoff and Richard Fisher, filed a federal lawsuit in US District Court in Chicago on January 29th, claiming the program is discriminatory and violates the constitution. The American Alliance for Equal Rights, an advocacy group in the field of law, has joined the plaintiffs in this lawsuit.

Had this been anticipated all along?
Two men who are "ready and willing" to invest "cannot because of their race," the lawsuit claims. They have petitioned the court to declare the "race-based stock offering is illegal" because they think it is unlawful.

Loop Capital, which was in charge of underwriting the investment offering, has previously stated that it would not check the race or gender of people who applied to be investors. As plaintiff's lawyer Daniel Lennington put it to Block Club Chicago, "verifying race and sex because people who click 'no' are not qualified" was Bally's goal.

The initiative "complies with our obligations under the Host Community Agreement with the City of Chicago," Bally's stated in an interview with WBEZ Chicago. This danger, however, appeared to be known to the business in its 27 December prospectus filed with the SEC.

"Our business and operations would be diverted from the time and attention of our management and the substantial costs associated with defending a lawsuit against us," Bally's stated.

Another concern was the potential consequences for the company's capacity to run its casinos and its overall financial health and performance in the event that the program was found to be unconstitutional.

Reactions to investment specifics were mixed.
Investors' opinions on the investment plan have been divided, regardless of the outcome of the litigation. One positive aspect of the initiative is that it achieves the goals specified by Bally's and the city: expanding access to investment possibilities for underserved populations.

According to the Chicago Southsider, Loop Capital CEO Michael Jackson recently stated, "This is a very unique opportunity" during a presentation. Rarely does an individual putting $250 have the same opportunity as someone putting $750 million, in the same security, at the same price, and at the same moment. "That simply does not occur."

Still others have doubts about the investment's merits. The casino is projected to be open for "approximately three to five years" before investors may expect to receive dividends, according to the prospectus. Given that the opening is scheduled for the autumn of 2026, it would suggest that dividends won't be anticipated until 2030 or later. Even if the casino never opens or closes, the money is still at risk.

The TRiiBE spoke with economist Damon Jones of the University of Chicago, who said he would recommend against the investment.

No one ever brags about their great investing prospects. According to him, they hoard them. "As a general rule in finance, you should question anything that someone is advertising to you."

Another snag in the Chicago project is a lawsuit.
Another roadblock in Bally's plans to construct its new flagship hotel has been the litigation. Gaming and Leisure Properties (GLPI) helped fill a big financial hole that the firm was in at the outset. A comprehensive financial agreement for the project was revealed in July by the real estate investment trust. As a component of the agreement, Bally's leased the property back out.

Problems with the design have also slowed things down. A multi-phase building schedule was originally planned, however the projected hotel tower would have interfered with city water pipes. As a result, the corporation had to rethink its original plans and incorporate hotel rooms atop the casino.

The purchase of the company by Standard General (SG), its major shareholder, on July 25th further exacerbated matters. Soo Kim, chairman of Bally, also controls SG, a hedge fund. The acquisition included the merger of Bally's with another casino operator controlled by Singapore, Queen Casino & Entertainment. After many failed attempts to acquire the company, the hedge fund finally settled on an offer of $18.25 per share in 2018, down from $38 in early 2022.