Associated Press

LAS VEGAS (AP) - An initial public offering of a tiny slice of Caesars Entertainment Corp. is allowing dozens of investors who bought into what once was the world's largest gambling company to get out with smaller losses than they might have seen.

Caesars shares nearly doubled by the middle of their first day of trading on the Nasdaq. They opened Wednesday at $9, jumped to $17.90 by midday and closed up 71 percent at $15.39.

The offering of 1.8 million shares _ or 1.4 percent of the company _ created buzz and led traders to chase the stock without regard to the much larger chunk of Caesars that investors can now dump into the market, said David Menlow, president of IPO Financial Network.

"This is as close to market manipulation as you can get without it being illegal," Menlow told The Associated Press.

The company said in the regulatory filing this week where it detailed its offering plan that dozens of insiders _ including major institutional investors such as the California State Teachers' Retirement System and a trust for actor Michael J. Fox _ can now sell more than 11 million additional shares.

The offering also enables New York investor John Paulson's hedge fund to sell a stake of 12.4 million shares, nearly 10 percent of the company.

And in six months, the company's nearly 100 million remaining shares _ the vast majority held by private equity firms Apollo Management Group and Texas Pacific Group _ can start going on the market as securities laws allow.

Even with Wednesday's price jump, the market is valuing Caesars at just $1.9 billion, much less than Apollo and TPG paid in 2007 when they took the company private for $17.1 billion and assumed $12.4 billion in debt. It was known as Harrah's Entertainment at the time.

The global recession battered the casino industry, leaving Caesars with few gamblers willing to wager as they used to _ but all the debt, and more. As of Sept. 30, Caesars had $19.6 billion in long-term debt and $1.15 billion in cash and cash equivalents.

Analyst Chad Mollman of Morningstar said another recession could force the company to seek bankruptcy protection.

"They're dramatically underwater in terms of the value of their stock, compared to what it was when they bought it," Mollman said of Caesars investors. "(But) this is a situation where they could lose their entire investment."

In 2010, when Caesars first told the Securities and Exchange Commission it hoped to resume being publicly traded, it planned to offer 31.3 million shares for $15 to $17 apiece. That would have valued Caesars at about $6 billion _ roughly one-third of what Apollo and TPG paid _ but buyers didn't line up, and Caesars canceled its plans.

"They couldn't get the $15 to $17 the old way, so they created a new method to get that (price)," Menlow said.

A Caesars spokesman declined comment about the offering saying the company is in a quiet period.

Mollman said he's never seen an offering for this small a slice of a company, especially a company the size of Caesars. Caesars owns or manages more than 50 casinos, most of them in the U.S. and the U.K. He said investors buying the stock now are speculating that Caesars shares will rise sharply within days and will soon sell.

"It's initially for the smaller investors, and then down the road, (the offering) sets up Apollo and TPG to begin selling their shares," Mollman said. "For them, hopefully in six to 12 months they can start to sell their shares."

He and Menlow said the shares may well drop before then.

"Based on the long-term fundamentals, we think the stock is overvalued," Mollman said of Morningstar's take on Caesars.

That is, Mollman believes the company isn't even worth $1.9 billion.

Caesars said the offering would bring it net proceeds of $13.1 million, after deducting bank fees and other expenses. It plans to use the funds for general purposes including development.

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Oskar Garcia can be reached at http://twitter.com/oskargarcia.

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