A very Chicago gamble(bitsaboutmoney.com)
bitsaboutmoney.com
A very Chicago gamble
https://www.bitsaboutmoney.com/archive/chicago-casino-investment-offering/
102 comments
> a San Francisco strip club that did an IPO in the first dot-com boom and went bust
There was a moderately famous documentary about unionization at a San Francisco strip club just a few years before that (called Live Nude Girls Unite). I wonder if the IPO one could have made an effective documentary subject as well.
There was a moderately famous documentary about unionization at a San Francisco strip club just a few years before that (called Live Nude Girls Unite). I wonder if the IPO one could have made an effective documentary subject as well.
They unionized, but only one club, and that one went bust. All the other strip clubs were owned by one guy, who's dead now. The SF strippers eventually won the gig worker pay lawsuit in 2022, but the class action settlement terms are not great.[1]
[1] https://sfbscsettlement.com/
[1] https://sfbscsettlement.com/
OK, now I have to ask if it's deliberate that you mention that both the unionized strip club and the IPO strip club "went bust"!
One thing I don’t get about Hollywood accounting is how do they manage to get credible people/companies to sign off on their books year after year…?
(Especially for those owned by listed companies)
And how can the studios and various deal brokers apparently act as if GAAP, FASB, and the SEC don’t exist.
(Especially for those owned by listed companies)
And how can the studios and various deal brokers apparently act as if GAAP, FASB, and the SEC don’t exist.
1) The middle tiers aren't publicly traded companies, often single-member LLCs or small partnerships used as vehicles for funding just a handful of projects. In general, they're not easy to scrutinize.
2) I think most of the accounting magic has to do with deferring income, and attributing and allocating future earnings. The mechanics and guesswork is extremely niche; industry norms set the guardrails for what's reasonable. IOW, Hollywood gets to write the rules.
3) I suspect there's less tax cheating than people cynically expect. Mostly the game is about tax deferral, minimizing the blast radius of projects that tank, and everybody jockeying--and stabbing each other in the back--to maximize their share of the pie. I doubt the government loses much revenue. They might nominally get more revenue for a single cycle if accounting was tightened up, but then you might lose much of the dynamism and risk taking, reducing tax revenue long-term.
Note: I have zero industry insight, though I once spoke with a former LA district IRS tax lawyer who seemed much more cynical about the shenanigans than what I presented above. And I got the sense that, like with Scientology and Donald Trump, the IRS has learned the hard way they don't have the wherewithal to win any serious litigation that threatens the status quo.
2) I think most of the accounting magic has to do with deferring income, and attributing and allocating future earnings. The mechanics and guesswork is extremely niche; industry norms set the guardrails for what's reasonable. IOW, Hollywood gets to write the rules.
3) I suspect there's less tax cheating than people cynically expect. Mostly the game is about tax deferral, minimizing the blast radius of projects that tank, and everybody jockeying--and stabbing each other in the back--to maximize their share of the pie. I doubt the government loses much revenue. They might nominally get more revenue for a single cycle if accounting was tightened up, but then you might lose much of the dynamism and risk taking, reducing tax revenue long-term.
Note: I have zero industry insight, though I once spoke with a former LA district IRS tax lawyer who seemed much more cynical about the shenanigans than what I presented above. And I got the sense that, like with Scientology and Donald Trump, the IRS has learned the hard way they don't have the wherewithal to win any serious litigation that threatens the status quo.
> I suspect there's less tax cheating than people cynically expect.
I'm sure there's some tax cheating going on, but I always got the impression that Hollywood Accounting was to reduce royalties for people who negotiated for a % of net profit instead of a % of gross revenue.
I'm sure there's some tax cheating going on, but I always got the impression that Hollywood Accounting was to reduce royalties for people who negotiated for a % of net profit instead of a % of gross revenue.
What's actually happening is that a lot of the companies used in a Hollywood production are interrelated. The same people own most of the stock so when they’re doing the accounting, they get to set the price they charge for the movie and make their profit on the production side. It’s all legal and GAAP, it’s just the production companies owned by the people who fund the movies making the real profit.
Oh, so it's similar to tech company transfer pricing.
Tyler Perry isn't a billionaire because he's made a bunch of blockbusters. He's a billionaire because he owns the entire film production chain, from studio to productions, and puts his name on all of the credits for good measure such as writer, director, producer, etc.[0].
[0]https://en.wikipedia.org/wiki/Tyler_Perry
[0]https://en.wikipedia.org/wiki/Tyler_Perry
IOW == In Other Words
They probably follow accounting rules to the letter.
This was an aside at the end of the article, but what an interesting strategy:
I bought the stock for the same reason I buy stock in every hotel, airline, bank, and similar I use: in the unlikely event a not-particularly-high-stakes poker player has a routine customer service complaint, Investor Relations is available as an escalation strategy, over e.g. hotel staff who might be long-since inured to listening to complaints from people who lost money in a casino.
I bought the stock for the same reason I buy stock in every hotel, airline, bank, and similar I use: in the unlikely event a not-particularly-high-stakes poker player has a routine customer service complaint, Investor Relations is available as an escalation strategy, over e.g. hotel staff who might be long-since inured to listening to complaints from people who lost money in a casino.
I'm sure this works if you're buying a couple thousand shares at a time but I don't think buying 10 shares of Southwest is going to make them listen to you any more or less when you have an issue on your flight.
It doesn't matter whether they actually value you any more. The point is that investor relations is staffed by competent people, as opposed to customer service which is staffed by incompetent people as an intentional matter of efficient human capital allocation. So you can get much more reliable help if you can present the right class signals, and if you are at least theoretically allowed to call that line.
Do you think they're going to ask for proof and how many shares you own? Anyone can claim to be an "investor."
Companies literally keep a big list of all the people who have shares and how many, in case they want to send out a dividend or something. If they think it is important to check it is easy to do once they have a name. Realistically the cost of checking is probably higher than just dealing with the issue at hand so they won't.
Though it is impolite to lie.
Though it is impolite to lie.
Stocks are generally held in the name of the broker (“street name”), not the individual. I’m not saying they can’t check but I wouldn’t bet on them calling up Schwab to verify you really own 10 shares of UAL.
>Companies literally keep a big list of all the people who have shares and how many, in case they want to send out a dividend or something. If they think it is important to check it is easy to do once they have a name.
I thought companies only knew the brokerage, and it was the brokerage who could tie it back to a specific person ?
I thought companies only knew the brokerage, and it was the brokerage who could tie it back to a specific person ?
I believe patio11 probably does this to satisfy his own ethics rather than as a strict necessity
Edit: and I see downstream he has an answer
Edit: and I see downstream he has an answer
They literally have no computer system that can tell them the difference between you and a hedge fund manager, and so an email to IR fairly reliably gets the white glove treatment. I used to send them on behalf of, cliched but accurately, Kansan pensioners to banks, in at least one case justified by “I am a shareholder because my IRA holds SPY, which holds your common. It was therefore with great displeasure that…”
(Obviously one can still email IR without actually owning a share, but I both prefer not lying and also enjoy the aesthetics of capitalism, which are extremely invested—ba dum bum—in seeing someone who owns one share as a shareholder.)
Anyhow: bored person, near top of org chart, with access to escalation group if that exists, who earns six figures and really wants you to come away from the experience satisfied. Exists in almost every publicly traded company in America.
(Obviously one can still email IR without actually owning a share, but I both prefer not lying and also enjoy the aesthetics of capitalism, which are extremely invested—ba dum bum—in seeing someone who owns one share as a shareholder.)
Anyhow: bored person, near top of org chart, with access to escalation group if that exists, who earns six figures and really wants you to come away from the experience satisfied. Exists in almost every publicly traded company in America.
That was a slightly unfortunate choice of example because my groggy Friday-afternoon mind assumed 'Kan-san' was some sort of polite and idiomatic term for 田舎 dwellers and wasted a few minutes trying to figure out what it was short for.
if anyone else was similarly confused: a 'Kansan' is someone from the US state of Kansas.
>They literally have no computer system that can tell them the difference between you and a hedge fund manager, and so an email to IR [...]
The "From" header on the email? It might be possible someone sending from a @gmail.com address is a hedgie, but if they want to announce their affiliation they'll use their company email.
The "From" header on the email? It might be possible someone sending from a @gmail.com address is a hedgie, but if they want to announce their affiliation they'll use their company email.
I think the idea is to take advantage of certain legal obligations that are triggered by ownership of any size.
Could you give some examples? I have no idea what legal differences would provide a benefit during customer interactions.
Has nothing to do with legal differences. It's just a different customer service team you end up talking to. It's in the same class of tricks as knowing the precise set of prompts to give to get immediately to a human operator when you call the main line.
Have done this twice recently. Did not own shares in either company outside of likely ownership in 401ks or index funds. They don’t check. Ridiculously effective.
I wonder how this could apply to American health insurance companies, where the company is very open about how diametrically opposed the interests of their investors are to the interests of their insured. I can’t even figure out how I would phrase my displeasure as an investor that the dirtbags at Anthem are denying vital healthcare to their “customers.” I suspect they’d reply “You’re welcome!”
He's written a bunch about this approach. Not sure where the main article is but here's one: https://www.kalzumeus.com/2017/09/09/identity-theft-credit-r...
Tangentially, some cruise lines offer credit to customers who are also shareholders.
https://www.cruisecompete.com/shareholderbenefits.php
https://www.cruisecompete.com/shareholderbenefits.php
Wow this was huge to learn. Thanks!
Holy fuck that's a terrible deal they offered on the $250 shares! Made up billion-dollar valuation aside, an 11% interest rate on a $24,750 loan means that it's never going to pay for itself and start producing a return for the owner, even at casino-level profits.
Bally's built a temporary casino in Chicago while the official one is getting funded up and built. Because, you know, you can't let that gaming license just sit there and do nothing.
Sadly the temporary casino is only taking about 60% of projected revenue so far.
https://www.yogonet.com/international/news/2024/10/16/82112-...
Bally blames the location and lack of parking and yadda yadda yadda, but Illinoisans are just saturated with gambling options right now. The suburban casinos, the Indiana casinos, Wisconsin first-nations Bingo, Illinois Lotto, the multi-state lotteries, home-rule gaming in restaurants and bars, online sports betting...we still have horse racing here for crying out loud. And, oh yeah, weed is legal here.
Sadly the temporary casino is only taking about 60% of projected revenue so far.
https://www.yogonet.com/international/news/2024/10/16/82112-...
Bally blames the location and lack of parking and yadda yadda yadda, but Illinoisans are just saturated with gambling options right now. The suburban casinos, the Indiana casinos, Wisconsin first-nations Bingo, Illinois Lotto, the multi-state lotteries, home-rule gaming in restaurants and bars, online sports betting...we still have horse racing here for crying out loud. And, oh yeah, weed is legal here.
One thing I noticed when I was last in Illinois is the absolutely amazing amount of slots "parlors". You can get a beer or something and they have 2 or 3 slot machines.
They're everywhere. Like one out of every 10 businesses if I had to make up a number. And almost every gas station, bar, or restaurant has slot machines in them.
What is happening in your state, Illinois?
They're everywhere. Like one out of every 10 businesses if I had to make up a number. And almost every gas station, bar, or restaurant has slot machines in them.
What is happening in your state, Illinois?
Two things:
1) The slots in bars and restaurants are a legitimization of the old video poker machines that the mob used to place in establishments. Can't beat 'em? Join 'em.
https://www.gambling911.com/poker/video-poker-kingpin-gets-t...
That said, every town has the choice to allow them or not. They tend to fall like dominos when they see the revenue. I just saw a restaurant owner on Reddit say he made $100K profit last year, and the location's share is typically a third of the handle.
2) We're taxed so heavily on nearly everything it becomes incredibly easy to pitch additional gaming forms as "see, this will help fund schools!" or whatever cause is up next. Except we're gullible, never realizing that Lotto proceeds replace budgeted educational funds and not supplement them.
1) The slots in bars and restaurants are a legitimization of the old video poker machines that the mob used to place in establishments. Can't beat 'em? Join 'em.
https://www.gambling911.com/poker/video-poker-kingpin-gets-t...
That said, every town has the choice to allow them or not. They tend to fall like dominos when they see the revenue. I just saw a restaurant owner on Reddit say he made $100K profit last year, and the location's share is typically a third of the handle.
2) We're taxed so heavily on nearly everything it becomes incredibly easy to pitch additional gaming forms as "see, this will help fund schools!" or whatever cause is up next. Except we're gullible, never realizing that Lotto proceeds replace budgeted educational funds and not supplement them.
At least as of a few years ago, Illinois had the most of any state. https://features.propublica.org/the-bad-bet/how-illinois-bet...
And since they’re only allowed in certain municipalities (not Chicago, though you’ll see them around), you can sometimes drive down a road and see one side just lined with depressing slot machine parlors with names like Bob’s Lounge or Susie’s Cafe.
That side is usually a poorer town that needs the revenue from the town on the other side, where the money is.
I’m not sure why, but in my experience while those establishments nominally serve beer, liquor, coffee, soft drinks, and sometimes food, and are perfectly legal and open to the public, they do not seem at all welcoming to random people popping in who aren’t there to gamble. Or maybe they just don’t like my vibe.
Perhaps some differ, but it’s a very different feeling than states like Louisiana or Nevada where lots of bars have gambling machines that are ignored by the majority of customers.
It’s a shame, because I’m sure they’re crowding out other businesses, including regular bars and cafes that would serve a broader audience.
And since they’re only allowed in certain municipalities (not Chicago, though you’ll see them around), you can sometimes drive down a road and see one side just lined with depressing slot machine parlors with names like Bob’s Lounge or Susie’s Cafe.
That side is usually a poorer town that needs the revenue from the town on the other side, where the money is.
I’m not sure why, but in my experience while those establishments nominally serve beer, liquor, coffee, soft drinks, and sometimes food, and are perfectly legal and open to the public, they do not seem at all welcoming to random people popping in who aren’t there to gamble. Or maybe they just don’t like my vibe.
Perhaps some differ, but it’s a very different feeling than states like Louisiana or Nevada where lots of bars have gambling machines that are ignored by the majority of customers.
It’s a shame, because I’m sure they’re crowding out other businesses, including regular bars and cafes that would serve a broader audience.
> What is happening in your state, Illinois?
Liberalism without the uptight New England financial discipline that makes it workable.
Liberalism without the uptight New England financial discipline that makes it workable.
So I guess the German strain of liberalism in Chicago and Milwaukee (cf. Altgeld) is New England now? Come on. That would be like if I call everything Assamese as Bengali
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An important part of the historical context here is that the black community in America has a lot of scar tissue around sketchy investment opportunities, and those scars go back, oh, call it 160 years (i.e. the Reconstruction era). When you have a community that is suffering from widespread generational poverty, as the black community in America broadly is, that community naturally tends to be very eager for opportunities for generating wealth — especially opportunities that present themselves as "This is it! This is your chance to buy into the American Dream, legitimately and officially, no messing around with crime, sports, or the music industry, you're going to have Investment Opportunities, you will be stockholders, this is what prudent people do to accumulate wealth and provide for their children & grandchildren."
The black community in America has been presented with many such opportunities. How many of them were legitimate? Nobody has a really solid number, for hopefully obvious reasons, but whatever the real rate of legitimate opportunities that sound like the above is, it's low enough that 160-ish years of it have left the black community in America still suffering from widespread generational poverty. Particularly there is a pattern in economic-bubble periods where members of the black community buy in near the top (because the growth of a bubble is driven by existing capital flowing into it and the black community has less capital, while whatever activity is inflating the bubble seeks out large clumps of capital first, as any growing sector does), end up as bagholders (because they bought in near the top of a bubble), and suffer disproportionately (because they had less capital, and so a given absolute loss is a bigger percentage of their capital than for wealthier communities). There have also, of course, been periods of undisguised racial violence, which have always involved theft as one form the violence takes. All of this leaves the black community in America with noteworthy long-term scars around the topic of investment opportunities particularly marketed to them — and yet, what are they supposed to do, give up on pursuing the American Dream, especially when someone promises up and down that this is it, they can leave behind the sordid stuff, this truly is the pathway to affluence, safety, and respectability?
I have never been to Chicago and I know nothing about Bally's. All I know is that while history rarely outright repeats itself, it quite often rhymes.
The black community in America has been presented with many such opportunities. How many of them were legitimate? Nobody has a really solid number, for hopefully obvious reasons, but whatever the real rate of legitimate opportunities that sound like the above is, it's low enough that 160-ish years of it have left the black community in America still suffering from widespread generational poverty. Particularly there is a pattern in economic-bubble periods where members of the black community buy in near the top (because the growth of a bubble is driven by existing capital flowing into it and the black community has less capital, while whatever activity is inflating the bubble seeks out large clumps of capital first, as any growing sector does), end up as bagholders (because they bought in near the top of a bubble), and suffer disproportionately (because they had less capital, and so a given absolute loss is a bigger percentage of their capital than for wealthier communities). There have also, of course, been periods of undisguised racial violence, which have always involved theft as one form the violence takes. All of this leaves the black community in America with noteworthy long-term scars around the topic of investment opportunities particularly marketed to them — and yet, what are they supposed to do, give up on pursuing the American Dream, especially when someone promises up and down that this is it, they can leave behind the sordid stuff, this truly is the pathway to affluence, safety, and respectability?
I have never been to Chicago and I know nothing about Bally's. All I know is that while history rarely outright repeats itself, it quite often rhymes.
I was hoping this was a long form piece on the O'Hare Spread.
> make a huge trade on margin, which is essentially like betting with someone else’s money, and then he would go to O’Hare airport
https://digitaledition.chicagotribune.com/tribune/article_po...
> make a huge trade on margin, which is essentially like betting with someone else’s money, and then he would go to O’Hare airport
https://digitaledition.chicagotribune.com/tribune/article_po...
> The market does not agree with this assessment. The entire market capitalization of Bally’s (NYSE: BALY) is, as of this writing, ~$1.5 billion. What’s the difference between the $50 million average imputed value of the other casinos and the $750 million imputed value of the Chicago casino? The $750 million is made up, that’s what.
> This is somewhat elementary and handwavy napkin analysis of a complicated business which, like most casinos and hotels, is heavily levered with a complex capital stack. But the investment case gets smothered by a napkin.
This analysis is not OK and Patrick should know better.
A quick Google [0] says Bally's has $5 billion in outstanding debt. That brings the market value of its assets to $6.5 billion and the question becomes "What's the difference between the $400m imputed value of the other casinos and the $750m value of this one?" And that's the kind of difference which gets explained by things like, it has 2x the average square footage, or it's more modern, or how about, it's in a city where it will have a monopoly on casino gambling, not in Las Vegas where there are dozens of competitors.
"A complex capital stack" isn't a good explanation for this analysis. It's a complex capital stack with one line item 3x the size of the only one considered.
I don't disagree with the conclusion that this is not a good deal. A fairer way to do this would be a parallel offering of class B shares to sophisticated investors, with the same economic rights and full transferability, then give the black churchgoers a 20% discount when they buy the class A. But the fundamental analysis is bad enough to make the article untrustworthy.
[0] https://companiesmarketcap.com/ballys-corp/total-debt/
> This is somewhat elementary and handwavy napkin analysis of a complicated business which, like most casinos and hotels, is heavily levered with a complex capital stack. But the investment case gets smothered by a napkin.
This analysis is not OK and Patrick should know better.
A quick Google [0] says Bally's has $5 billion in outstanding debt. That brings the market value of its assets to $6.5 billion and the question becomes "What's the difference between the $400m imputed value of the other casinos and the $750m value of this one?" And that's the kind of difference which gets explained by things like, it has 2x the average square footage, or it's more modern, or how about, it's in a city where it will have a monopoly on casino gambling, not in Las Vegas where there are dozens of competitors.
"A complex capital stack" isn't a good explanation for this analysis. It's a complex capital stack with one line item 3x the size of the only one considered.
I don't disagree with the conclusion that this is not a good deal. A fairer way to do this would be a parallel offering of class B shares to sophisticated investors, with the same economic rights and full transferability, then give the black churchgoers a 20% discount when they buy the class A. But the fundamental analysis is bad enough to make the article untrustworthy.
[0] https://companiesmarketcap.com/ballys-corp/total-debt/
Yeah I personally think the valuation is the least egregious part. If they get sued, they’ll have a defense for how they arrived at that number. It’s not 10x off.
The bigger problem is the terrible loan terms.
The bigger problem is the terrible loan terms.
You don't have to take the loan, though. I think I'd prefer to buy the $250 shares at the terrible loan terms than to buy the unleveraged shares at $25,000, which suggests that the loan adds value.
The leveraged shares are essentially an option. If the casino way outperforms expectations, the shareholders will get a huge return on their money (100x return or more). If it meets expectations or loses money, they are out their $250. That fits the profile of what was asked for: if anyone gets very rich off this they want the community to share in the proceeds. Whether 11% "financing" cost is fair or not has very little to do with the cost of funds and everything to do with the volatility of the future returns. If there's any chance the casino doubles or triples or sextuples in value, those shares are very valuable - even though that chance would presumably be offset by a large chance of it becoming worthless.
My biggest problem with this is the transfer pricing issues. Bally's has every incentive to route profits to its other corporate entities and a lot of legitimate opportunities to do so.
> This is a constant risk of being the junior partner in a structure, particularly without an aligned senior partner who would be as adversely impacted by sharp operating as you would be.
This would also be solved by issuing the second class of stock with the same economic rights. Some hedge funds get to invest in it, someone who can assess the appropriate discount to apply for being the junior partner. And if Bally's ever do screw the shareholders, they have the perfect parties for a lawsuit: a sophisticated, well-coordinated operator in partnership with a sympathetic plaintiff.
The leveraged shares are essentially an option. If the casino way outperforms expectations, the shareholders will get a huge return on their money (100x return or more). If it meets expectations or loses money, they are out their $250. That fits the profile of what was asked for: if anyone gets very rich off this they want the community to share in the proceeds. Whether 11% "financing" cost is fair or not has very little to do with the cost of funds and everything to do with the volatility of the future returns. If there's any chance the casino doubles or triples or sextuples in value, those shares are very valuable - even though that chance would presumably be offset by a large chance of it becoming worthless.
My biggest problem with this is the transfer pricing issues. Bally's has every incentive to route profits to its other corporate entities and a lot of legitimate opportunities to do so.
> This is a constant risk of being the junior partner in a structure, particularly without an aligned senior partner who would be as adversely impacted by sharp operating as you would be.
This would also be solved by issuing the second class of stock with the same economic rights. Some hedge funds get to invest in it, someone who can assess the appropriate discount to apply for being the junior partner. And if Bally's ever do screw the shareholders, they have the perfect parties for a lawsuit: a sophisticated, well-coordinated operator in partnership with a sympathetic plaintiff.
You're right. I was bucketing the pricing/payout issues into the loan terms but they equally apply if you don't take out the loan.
Obviously there are many better ways to structure this if a sophisticated counterparty actually wanted a good investment opportunity for the community. Sadly that's not in anyone's interest.
Obviously there are many better ways to structure this if a sophisticated counterparty actually wanted a good investment opportunity for the community. Sadly that's not in anyone's interest.
Some truly hideous AI art on this one.
How could the people of Chicago possibly think a casino is going to improve things?
It's not the people that matter, it's the politicians. They can say "it'll help fund our pensions without a tax increase or budget cuts" to quell the voters and have a much better chance at getting re-elected with all the contributions flowing to their campaigns.
If the politicians really cared what their constituents thought or about the long-term financial health of the city, they wouldn't be leasing away our assets at firesale prices (like the Skyway and street parking).
We need more people in government who care about good government like JB Pritzker, Alexi Giannoulias, or even our Parks superintendent Rosa Escareno.
If the politicians really cared what their constituents thought or about the long-term financial health of the city, they wouldn't be leasing away our assets at firesale prices (like the Skyway and street parking).
We need more people in government who care about good government like JB Pritzker, Alexi Giannoulias, or even our Parks superintendent Rosa Escareno.
As the article explains, the primary thing they'll hoping it'll improve is the city's tax base, given that broad-based tax hikes are politically unpalatable. This isn't wildly implausible.
The people of Chicago only care about the streets being plowed and swept.
Two random things completely tangent to the article's main topic:
1. The bit at the end about the happenstance of having stock in "every hotel, airline, bank, and similar I use" as a chip to potentially use in a customer service escalation case is hilarious and yet a bit thought provoking....
and
2. I'd love to sit across a poker table from Patrick some day, however terrifying that may be.
1. The bit at the end about the happenstance of having stock in "every hotel, airline, bank, and similar I use" as a chip to potentially use in a customer service escalation case is hilarious and yet a bit thought provoking....
and
2. I'd love to sit across a poker table from Patrick some day, however terrifying that may be.
It is getting some skeptical coverage
https://blockclubchicago.org/2025/01/24/ballys-chicago-wants...
but not enough, seems downright exploitative to me.
https://blockclubchicago.org/2025/01/24/ballys-chicago-wants...
but not enough, seems downright exploitative to me.
wow i don't like the 'wink wink nudge nudge' very obvious racism against african americans in this article. A lot of pointed and extraneous details about various minorities (non-blacks) that fall squarely into very specific talking points. In fact the only minorities this article doesn't mention are african americans, despite very obviously talking about them. And don't tell me i'm reaching...It's called theory of mind. Kind of sad this has gotten so many points.
Patrick has shown these views before but he’s more open about them now due to certain recent events. He just has a tendency to obfuscate to make himself look more intelligent and interesting.
It is interesting that he pitches himself as a hero due to VaccinateCA (which I tried to use because I trusted him 4 years ago but was useless in my experience compared to my states megasite online queue) but has no interest in pointing out who the recent HHS Secretary designate is.
It is interesting that he pitches himself as a hero due to VaccinateCA (which I tried to use because I trusted him 4 years ago but was useless in my experience compared to my states megasite online queue) but has no interest in pointing out who the recent HHS Secretary designate is.
There's a lot of interesting stuff in here, but there's also a lot of garbage. Talking about the African American community in Chicago, but then using examples from LA to prove a point, is at best a horrible argument and at worst purposefully misleading.
I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black. There are no pogroms happening here against people who aren't black, even if they do happen to own a business. This is just such a weird statement to have to make.
I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black. There are no pogroms happening here against people who aren't black, even if they do happen to own a business. This is just such a weird statement to have to make.
I could have quoted the roadshow verbatim in support of the point, but it felt tangential. The point is not “Chicago is on the precipice of a pogrom.” It is “political elites in Chicago’s African American community believe the community is impoverished in part because of extractive practices of vice entrepreneurs, and required as a condition of their political assent that Chicago keep equity ownership of a vice business in their community.”
The point is a true one; this _really is_ what some community leaders believe. This belief _really is_ why Chicago is doing this program.
> “Tonight is about a new opportunity on how to participate, about not just being a consumer but to be an owner,” Ald. Ronnie Mosley (21st Ward) said at the pulpit in front of the crowd of a couple hundred people.
https://thetriibe.com/2025/01/chicagos-black-residents-can-i...
There is much more support for that having actually been the sales pitch and political compromise there and elsewhere on the record.
And yes, this is a belief with a long and storied history in American politics.
The point is a true one; this _really is_ what some community leaders believe. This belief _really is_ why Chicago is doing this program.
> “Tonight is about a new opportunity on how to participate, about not just being a consumer but to be an owner,” Ald. Ronnie Mosley (21st Ward) said at the pulpit in front of the crowd of a couple hundred people.
https://thetriibe.com/2025/01/chicagos-black-residents-can-i...
There is much more support for that having actually been the sales pitch and political compromise there and elsewhere on the record.
And yes, this is a belief with a long and storied history in American politics.
Do you, Patrick, believe that “Chicago’s African American community is impoverished in part because of extractive practices of vice entrepreneurs?” Phrasing it this way winks that you don’t think so, but perhaps I am misreading you.
However, the conclusion of your article seems to be that Bally’s (a vice entrepreneur) is about to further impoverish them, this time under the guise of ownership but as usual with the support of the local political elites. So for consistency I think your answer should be “yes.”
You’d make a bigger difference in your hometown by conveying this message directly to the folks being targeted, rather than the HN crowd.
However, the conclusion of your article seems to be that Bally’s (a vice entrepreneur) is about to further impoverish them, this time under the guise of ownership but as usual with the support of the local political elites. So for consistency I think your answer should be “yes.”
You’d make a bigger difference in your hometown by conveying this message directly to the folks being targeted, rather than the HN crowd.
Patrick has mentioned several times lately that he writes for a broad audience, in a way that’s easy for people with influence to share. He didn’t write this essay for HN; it’s incidental that this article is posted here.
There's an amusing symmetry between the lines he quotes that carefully suggest without actually claiming that e.g. the operating company will pay out all its profits in distribution, and the way everything he himself writes suggests without actually claiming.
Patrick used to be better at obfuscating his true views with absurd language but I’ve noticed him going full mask off recently.
> yes, this is a belief with a long and storied history in American politics.
I wonder if there’s another set of beliefs with a long and storied history in American politics…..
I wonder if there’s another set of beliefs with a long and storied history in American politics…..
As with most Chicago critics, there are valid points to be made but it often feels too gleeful.
The story plays them up too much, but such tensions definitely exist. They just rarely erupt to the surface. Here's a story that did happen in Chicago which I don't think corroborates the narrative, but does add some color to it: https://www.nytimes.com/2020/10/15/business/beauty-store-rac...
I agree. That part was way off base.
> I live in the Chicago South Side, in a neighborhood that is 99% black. I am not black.
May I ask why? This seems like a deliberate choice. It is, at best, met with suspicion by other residents.
May I ask why? This seems like a deliberate choice. It is, at best, met with suspicion by other residents.
I lived in a south side neighborhood that was >80% black and am white for nearly 20 years.
I lived there for a variety of reasons that weren’t suspicious at all like price, location, commute, etc. my neighbors didn’t seem particularly suspicious of the decision…
I lived there for a variety of reasons that weren’t suspicious at all like price, location, commute, etc. my neighbors didn’t seem particularly suspicious of the decision…
All of my neighbors seem to like me. The specific area I'm in has a 14% vacancy rate, so the people around here aren't worried about gentrification. I'm walking distance to the Metra. My wife has family in Indiana, and not having to drive through the entire city to see them was also a factor.
Why not? Everyone has to live somewhere. If it wasn't there, it would be somewhere else.
I'm pretty sure hen wasn't given a deliberate choice whether to be Black or not.
I'm pretty sure the question was about choice of location
> Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith.
Chicago is an extremely segregated city. In segregated cities, there is a nuanced thought process one must undergo to move into an area where you are considered an outsider. In Seattle for example, the tech community is overall reviled for having gentrified the Central District, where historically black areas were bulldozed to erect overpriced cardboard apartments for tech plebes. This is a legitimate question.
Chicago is an extremely segregated city. In segregated cities, there is a nuanced thought process one must undergo to move into an area where you are considered an outsider. In Seattle for example, the tech community is overall reviled for having gentrified the Central District, where historically black areas were bulldozed to erect overpriced cardboard apartments for tech plebes. This is a legitimate question.
The reason you're being downvoted is because "Why are you living there?" can sound suspiciously like "You shouldn't be living there." It's also a leap to assume the black people living there are going to suspicious of him. You'd be horrified if a group of white people were "suspicious" of a black man living in their neighborhood and this should be no different.
Another question is what will his answer do? How will your opinion of him change or be influence by his answer? Maybe he was born there. Maybe that's all he can afford. Maybe he found an apartment with a particular architectural style unique to that area he wants to live in. Maybe it's close to his friends, or close to his girlfriend, or not too close to his girlfriend, or close to his parents, or easy to get to work, or he often goes into central/southern IL or over to Indiana and doesn't want to drive through the city every time.
There are literally hundreds of possible reasons.
Another question is what will his answer do? How will your opinion of him change or be influence by his answer? Maybe he was born there. Maybe that's all he can afford. Maybe he found an apartment with a particular architectural style unique to that area he wants to live in. Maybe it's close to his friends, or close to his girlfriend, or not too close to his girlfriend, or close to his parents, or easy to get to work, or he often goes into central/southern IL or over to Indiana and doesn't want to drive through the city every time.
There are literally hundreds of possible reasons.
Including, it’s a nice place to live!
Let's not get crazy now /s
It’s probably worth pointing out that historically the majority of the wealthiest pockets of Chicago were on the south side. There are a lot of grand streets with magnificent homes, broad sidewalks with enough space for the tree canopies to develop nicely, etc. All that exists on the north side too, just not as frequently. And where it does it’s 2-3x more expensive.
There’s a couple streets down in Kenwood that I don’t think have any equivalent on the north side though…
There’s a couple streets down in Kenwood that I don’t think have any equivalent on the north side though…
[deleted]
notinchicago(4)
[deleted]
Breaking it down as a TLDR, as this is quite a long article, written with (what I consider to be pleasant, others might not), flourish in terms of the prose:
There is an "investment" opportunity to invest in a casino with the city limits of Chicago, that the city of Chicago feels will fix long-term budgetary mismanagement issues.
In order to qualify for this investment, investors need to self-certify as a "Minority" (or woman), but no clear definition of "Minority" exists. This could be constitutionally illegal due to the city's involvement in segregating the opportunity.
When digging a little deeper, it becomes clear this is not an opportunity to invest directly in a casino, but in an entity that has a 25% "economic interest" in an operating company that operates a casino.
Disbursement of profits is controlled by the parent company (Bally's), that has 75% voting rights in the entity invested in, and manages and operates the operating company investors own 25% of. This means if the operating company owes the holding company all its profits for, say, "licensing" rights of IP (say, customer databases, or trademarks, and so on), there are no profits to distribute to the investors. This is a familiar ruse to those who know how companies offshore profits to tax-favourable locales.
There are 1,000 slots open to invest, each worth $25k, valuing the company at exactly $1bn, but the parent company (that owns 75%, remember), despite owning more than a dozen other properties and resorts is valued at a total market cap of $1.5bn. This suggests that the market as a whole does not consider that investment slice worth $250m, because it does not value the other 75% at $750m.
If an investor doesn't have $25,000 to buy a slot, they can invest just $250, with the remainder being made up with a no-recourse loan. The interest on this is marked up at 11% annually, compounded quarterly. The $250m needed to provide this financing this, has come from lending on which the operating company is paying ~5%.
The prospectus states profits are unlikely for "3 to 5 years", assuming of course there are profits after "licensing fees" and so on, have been handled. This means the loan bought for $250 is likely to grow to $34k-$42k with interest.
When (if?), dividends are issued to pay off the loan, the payments to pay off the interest may be considered by the IRS a taxable benefit. The prospectus agrees this is possible but "unlikely".
So in a single line: you can pay $250 to create a possible tax bill on $18k that goes to the loan provider in 5 years time, and you may get your $250 back (and more), if the casino operator decides to pay that out through the goodness of their heart.
And this is being supported - including through "roadshows" at churches attended mostly by African Americans - by the city itself, in a way that is predictably going to back-fire, and may be very illegal.
SEC should take a look. Public-spirited lawyers who don't want to see some of the poorest communities in the country get ripped off should also take a look. If I was a Bally's shareholder, I'd be concerned that in a few years time, the company I'm a shareholder in is going to be embroiled in scandal and potentially a Supreme Court ruling.
There is an "investment" opportunity to invest in a casino with the city limits of Chicago, that the city of Chicago feels will fix long-term budgetary mismanagement issues.
In order to qualify for this investment, investors need to self-certify as a "Minority" (or woman), but no clear definition of "Minority" exists. This could be constitutionally illegal due to the city's involvement in segregating the opportunity.
When digging a little deeper, it becomes clear this is not an opportunity to invest directly in a casino, but in an entity that has a 25% "economic interest" in an operating company that operates a casino.
Disbursement of profits is controlled by the parent company (Bally's), that has 75% voting rights in the entity invested in, and manages and operates the operating company investors own 25% of. This means if the operating company owes the holding company all its profits for, say, "licensing" rights of IP (say, customer databases, or trademarks, and so on), there are no profits to distribute to the investors. This is a familiar ruse to those who know how companies offshore profits to tax-favourable locales.
There are 1,000 slots open to invest, each worth $25k, valuing the company at exactly $1bn, but the parent company (that owns 75%, remember), despite owning more than a dozen other properties and resorts is valued at a total market cap of $1.5bn. This suggests that the market as a whole does not consider that investment slice worth $250m, because it does not value the other 75% at $750m.
If an investor doesn't have $25,000 to buy a slot, they can invest just $250, with the remainder being made up with a no-recourse loan. The interest on this is marked up at 11% annually, compounded quarterly. The $250m needed to provide this financing this, has come from lending on which the operating company is paying ~5%.
The prospectus states profits are unlikely for "3 to 5 years", assuming of course there are profits after "licensing fees" and so on, have been handled. This means the loan bought for $250 is likely to grow to $34k-$42k with interest.
When (if?), dividends are issued to pay off the loan, the payments to pay off the interest may be considered by the IRS a taxable benefit. The prospectus agrees this is possible but "unlikely".
So in a single line: you can pay $250 to create a possible tax bill on $18k that goes to the loan provider in 5 years time, and you may get your $250 back (and more), if the casino operator decides to pay that out through the goodness of their heart.
And this is being supported - including through "roadshows" at churches attended mostly by African Americans - by the city itself, in a way that is predictably going to back-fire, and may be very illegal.
SEC should take a look. Public-spirited lawyers who don't want to see some of the poorest communities in the country get ripped off should also take a look. If I was a Bally's shareholder, I'd be concerned that in a few years time, the company I'm a shareholder in is going to be embroiled in scandal and potentially a Supreme Court ruling.
mplewis(3)
Having two tiers of stock with the insiders having the control shares used to be prohibited by the New York Stock Exchange. Now it's common. Google and Facebook are set up that way, so they have presidents for life. So are some lesser companies which really need to fire the CEO but can't.
Then, what you're buying into is not the operating entity. It's just a holding company. Not even the parent holding company that owns many casinos; that's BALY. It's a holding company in the middle, one whose returns are totally determined by the other parts of the stack. This is much like film investing, where you can buy an interest in "Silver Screen Partners IV" and get a share of the profits from a specific film. Except that the studio and the film producer control the accounting between related entities. Those deals are generally a lose, although you get to go to the premier and meet the cast.
And then there's the leverage. When you buy in, you're under water, and may stay there. Can't speak to the tax consequences.
This is so awful it makes meme coins look good.
(Favorite worst deals: 1) being pitched on municipal bonds backed only by revenue from future sewer charges for a development not yet built, and which never was. Junk municipal bonds are a thing. 2) a San Francisco strip club that did an IPO in the first dot-com boom and went bust. SEC CIK 931799.)