Studio City applies for IPO

Monday 14th of August 2017

Studio City International Holdings, the holding company Macau’s Hollywood-themed Studio city, has reportedly filed with the U.S. Securities and Exchange Commission for an initial public offering.

Studio City is a joint venture between Melco Resorts and Entertainment, which has 60 percent and New Cotai Holding, which has the remainder. New Cotai is a private company owned by private investment companies.

According to Bernstein, there is no public document for the IPO as the company filed confidentially under new SEC rules.

Bernstein said there is little clarity at present as to the rationale for the filing. It said it may provide New Cotai with an exit route, providing banks and other investors a way to approach the company and to gauge interest.

It said New Cotai may be willing to buy secondary shares, while Melco may be prepared to buy out its joint venture partner.

A second reason, according to Bernstein, may be that there is pressure to begin work on Phase 2 of the project and New Cotai is not prepared to invest additional capital.

“The IPO, if it were to happen, does not make much sense to us at this stage (from the perspective of MLCO). It further creates complexity for MLCO, a company which is already complicated by Macau standards. At this stage, we do not foresee Studio City receiving an adequate valuation based on the property's current performance and structure. If it were to go ahead, the pricing would be at a substantial discount to MLCO valuation in our view,” the firm said.

“Perhaps New Cotai is finally selling at whatever price and MLCO isn't offering anything appealing, so trying this route.”

There has been speculation for some time that Melco would ultimately buy out its joint venture partner in the Studio City IR to obtain the benefit of the full revenue stream. Bernstein says this is still the best option. The firm says Studio City is probably “just flying a kite to gauge valuation and interest.”

Bricks & Mortar Joint venture IRS IPO Sell off