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Trump Entertainment Resorts (TRMP)
Markets Don't Take Kindly to Gambling as Trump Stock Falls
The budget standoff in New Jersey has taken its toll on companies with casinos operating in Atlantic City. The budgeting problems have caused those casinos to close until the situation is resolved. Trump Entertainment Resorts Inc., which has three casinos in Atlantic City has been hit particularly hard by the news, and shares of the company fell six percent in trading Wednesday morning. So how large will the shutdown's impact on Atlantic City and the casinos actually be?
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Because of the budget impasse, all government activities deemed to be nonessential have been shut down. Since the state's Casino Control Commission is not considered essential, and casinos are not allowed to operate if the regulators aren't working, the casinos have been forced to close despite being private businesses. It is estimated that the casinos closing will result in a drop in industry revenues between $20 million and $22 million per day. In an ironic sort of way, the shutdown from the budget standoff will end up having a negative impact on the millions of dollars of tax revenues that the casinos end up generating for New Jersey.
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Mark Juliano, the Chief Operating Officer of Trump Entertainment Resorts, said "For future investment it makes people think that there is not a government that is stable enough to administer their own policies." Juliano also comment that if the shutdown ends up being prolonged, up to 2,000 employees might be laid off, and prospects for expansion could be affected. Steven Gart, an analyst with Nickel Capital, speculated that Trump Entertainment Resorts will end up losing 1% of the quarterly earnings, or roughly $750,000, for each day that the casinos remain closed.
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The effects of the government shutdown on the casinos are expected to be mostly short term, but some analysts have noted that there is the possibility for longer term effects. Matthew Jacob, an analyst at Majestic Research, noted that the casino industry has been stable in the past but noted that changes in the economy such as oil prices and interest rates could impact gambling behavior. He said, "But we may be seeing . . . somewhat of a breaking point where these economic forces do start impacting the casino industry." While the direct impact of the shutdown will most likely be a short term effect, it has reminded investors about the regulation the industry faces. There are possible concerns about the state possibly increasing the tax on casinos to cover the shortfall. Given the lack of a clear alternative to solving the standoff, the length of this shutdown could pose more significant problems for earnings and development in the rest of the quarter.
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Profile |
The Company's principal activity is to Own and manage casino operations, room rentals, food and beverage sales and entertainment revenues. The Company has the right to use the trademark "Trump" according to the trademark license agreement. The Company operates three casinos in the Atlantic City market and a riverboat casino, Trump Casino, at Buffington Harbor. On 21-Nov-2004 the Company filed for chapter 11 proceedings and on 20-May-2005 the Company emerged from chapter 11 proceedings.
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