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In 2013, Amer Ramo’s application was denied. Ramo had pleaded guilty to receipt, possession and purchase of contraband cigarettes and had received a five‐-year probation sentence. 27 David Morris and his company were denied licensure. Morris had failed to make a full and true disclosure in his application and the Board found he had been “less than candid” during his background investigation and hearing. 28 In 2011, Robert Patterson was denied as a key employee. He had been terminated from his job based on embezzlement charges involving $34,000 and, related to those charges, he had been found guilty of criminal forgery. 29 If Nevada gaming regulators determine Deutsche Bank is not a suitable to own interests in Nevada casinos, this could force Station Casinos to buy out the bank’s 25% interests (approximately $280 million, based on the $1.12‐-billion valuation described earlier), which would require additional equity or debt funding and could significantly change the financial terms of the proposed IPO. Alternatively, if such a determination by Nevada regulators occurred after the IPO, the bank would be forced to dispose of its interest unexpectedly, which could significantly depress the price of SCC’s Class A shares. SCC appears to be aware of exactly this risk. In the newly‐-filed S‐-1/A, it added a paragraph under the section, “Nevada gaming laws and regulations include requirements that may discourage ownership of our Class A Common Stock or otherwise impact the price of our Class A Common Stock”: Moreover, if any of our significant stockholders or members of Station Holdco is required to, but does not, apply for a finding or suitability or licensing or is found unsuitable by the Nevada Commission, they may rapidly liquidate their equity holdings, which could cause the market price of our Class A Common Stock to decline. Additionally, we could be required to repurchase any shares or LLC Units held by such significant stockholder or member for cash, notes bearing interest at the applicable federal rate or a combination of cash and notes. In the event that we were required to repurchase shares for cash, our cash position would be reduced and our liquidity and financial condition could be materially adversely affected. There can be no assurance that we would have sufficient cash available to meet such obligation as well as our continuing operating requirements or that, if additional financing were required, that such financing could be obtained on terms acceptable to us, if at all. 30 Ironically, the latest version of SCC’s prospectus still does not disclose the regulatory troubles surrounding Deutsche Bank, who is also acting as the lead underwriter for the IPO. Prospective investors should be provided with full disclosure of the regulatory issues surrounding Deutsche Bank and the attendant risks before they invest. 4. Station Casinos Corp.’s Class A shares will be second-class shares with negligible votes and unclear prospects for dividends. Station Casinos Corp. will be controlled by the Fertitta family after the IPO. This is explicitly stated as the intended effect upon the completion of the IPO, even though the current S‐-1 does not yet have the exact number to be issued for either the Class A shares or Class B shares. Page 6 of 11
Affiliates of Frank J. Fertitta III, our Chairman and Chief Executive Officer, and Lorenzo J. Fertitta, a member of our board of directors, will hold the substantial majority of our issued and outstanding Class B Common Stock having ten votes per share. As a result, the Fertitta family will be able to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws and the approval of any merger or sale of substantially all of our assets. Accordingly, we will be a "controlled company.” 31 Here is a summary table as we understand the voting rights of the different classes of shares to be issued by Station Casinos Corp.: 32 Class B Shares (to be issued to existing holders of Holdco LLC units): voting rights, with no economic interest in SCC. Class A Shares (to be issued through the IPO): entitled to all economic interest in SCC. Voting Rights Who Can Own These 10 votes per Existing Holdco owners who own at least 30% of share Holdco LLC units and maintain 10% ownership of Class A shares. Only the Fertittas can qualify because they, through affiliates, currently own 54.8% of Holdco. The next largest owner is Deutsche Bank’s GACC at 25%. 1 vote per share Other existing Holdco owners 1 vote per share Station Casinos employees with profit units, Station Casinos warrant holders, existing Holdco owners who exchange their LLC units (along with their Class B shares), IPO investors. While the Fertittas will probably sell a portion of their holdings through the IPO, they will enjoy 10:1 super voting rights with the Class B shares they continue to hold, while outside investors with Class A shares will only have 1:1 voting rights. Because the company is not refinancing its debt and will be bound by a new tax receivable agreement which pays 85% of the potential tax benefit from the IPO transaction to existing Holdco owners, 33 new Class A shareholders’ prospects for dividends may be dim. These obligations will limit Holdco’s ability to upstream distributions for SCC (which will receive only a minority of any distributions from Holdco anyway): The existing debt agreements of Station [Casinos] LLC limit the ability of Station [Casinos] LLC to make distributions to Station Holdco, which effectively restricts the ability of Station Holdco to distribute sufficient funds to permit Station Corp. to pay dividends to its stockholders. In addition, Station Corp. will be required to apply funds distributed by Station Holdco to pay taxes and make payments under the tax receivable agreement. Therefore, we cannot assure you that you will receive any dividends on your Class A Common Stock. 34 We will analyze the highly‐-complex corporate structure of SCC more fully in a separate report. For now, we note that the cost of a dual‐-class share structure was recently illustrated in hospitality when Marriott prevailed in a contest to acquire Starwood Hotels over a company whose shares had disparate voting rights. 35 The cost was clear: “Shares with reduced voting rights Page 7 of 11
Page 1 and 2: November 30, 2015 First-Class Risks
Page 3 and 4: 1. Station Casinos Corp. is paying
Page 5: While SCC plans to use the IPO proc
Page 9 and 10: ights, and shifting risks in its cu
Page 11: 36 Crain’s Chicago Business, 11/1

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