How Deutsche Bank Desperation Could Slam RRR

Red Rock Resorts (RRR) was already an attractive short ahead of the stock's quiet period expiration, and now investors have another reason to short shares: Deutsche Bank's (DB) desperate need to raise cash. As Deutsche Bank looks around for assets to liquidate, RRR seems like an easy target: they own a 17% stake of the casino group, the IPO has performed well - making insiders like Deutsche Bank significant gains and Deutsche will finally have a chance to cash out their chips on Monday, October 24th when the IPO lock-up expires. The timing couldn't be more attractive for the cash-hungry bank - and for investors. 

RRR's insider shareholders hold a large portion of the approximate 115.9 million shares outstanding. RRR’s pre-IPO shareholders, directors, and executives will have the chance to sell previously restricted shares, which number 88.6 million when the lockup expires. This figure dwarfs the 27.35 million shares offered to the public at the company’s IPO. If even a small group of these insiders decide to sell shares, there could be a massive downward impact on share price.

Investors looking to take advantage of the likely hit that will be delivered to RRR when the stock's IPO lockup expires next week should establish a short position in the stock this week. When insiders are finally allowed to sell shares on Monday, October 24th, expect to see shares slide. Investors should cover their short positions once the lockup expires.