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Chairman of Park Place Entertainment Under Fire for Selling Stock

Park Place Entertainment Corp. Chairman Stephen Bollenbach sold 3 million shares of stock in the Las Vegas casino company last week, prompting dismay among analysts and angry calls for his resignation from the company's largest investor.

Bollenbach sold about $32 million in Park Place stock last week after the exercise of options -- indicating a per-share sale price of $10.67. The options carried exercise prices between $6.38 and $6.50 per share, meaning Bollenbach netted between $12.5 million and $12.9 million from the sale.

Bollenbach, the chief executive of Hilton Hotels Corp., received 6 million options when Park Place spun off from Hilton a year ago, and he has exercised 5 million of these options so far. However, all of these options are set to expire at the end of the year.

David Anders, gaming analyst with CS First Boston, said the sale shouldn't be viewed as a red flag that Park Place's fundamentals aren't sound.

However, "it never looks good when an insider sells a significant portion of his holdings in the company," Anders said. "From that perspective, (investors) have a right to be angry."

Trading volume in Park Place spiked at 5.1 million shares on Feb. 9, four times its normal volume. The stock fell 56 cents that day. It gained 31 cents today, to close at $10.44.

This incurred the wrath of Highfields Capital Management, a Boston hedge fund that controls nearly 18 million shares of Park Place stock, or 5.9 percent of the company. The Wall Street Journal reported today that Highfields has called for Bollenbach's resignation.

"(Bollenbach's) interests are not parallel with those of Park Place's shareholders and it is time for him to resign from the board," wrote Jonathon Jacobson, a principal of Highfields, in a letter to Park Place board members quoted by the Journal. "Shareholders have suffered enough from his large sales being misinterpreted as indicators of insiders' outlook for the company's prospects."

Stuart Linde, gaming analyst with Lehman Bros., said Bollenbach will eventually move aside anyway.

"At some point, (Park Place Chief Executive) Arthur Goldberg will move up to be chairman of the company," Linde said. "It will be the natural progression.

"If Steve Bollenbach sold 3 million shares of Hilton, (investors) should be more concerned about that."

Still, the sale "threw cold water" on an analyst meeting held by Park Place in Las Vegas last Friday, Anders said, as analysts questioned the company on the sale.

"It puts existing management in an awkward position to tell investors that everything's great when their chairman's selling shares," Anders said. "(People) were not so much angered as dismayed over the timing of it. Everyone found it surprising that Steve would sell right in front of an analyst meeting."

In October, SEC filings indicate, Bollenbach sold 2 million shares acquired through options. Those shares carried a market value of $25.2 million. Bollenbach still has 1 million options, and an additional 3 million options will vest over the next four years.

Park Place declined to comment on the Bollenbach sale or the Highfields letter.

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