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UNITE HERE has ‘various issues’ with Frank and Lorenzo Fertitta’s Red Rock Resorts IPO

The Fertitta brothers’ union problems are following them to the stock market.

Jason Merritt/Getty Images

On Jan. 14th, Red Rock Resorts Inc., the casino company controlled by UFC co-owners Frank and Lorenzo Fertitta and formerly known as Station Casinos, filed an amended S-1 with the SEC to go public. As Bloody Elbow previously reported, the net proceeds of the offering will not finance growth or business development activities, but will go to key corporate insiders and their family members, including $112.5 million to each of the Fertitta brothers and $53 million to trusts for their six children.

It's unusual for an IPO to be a pure cash event for key insiders and the Fertittas' detractors have taken notice. UNITE HERE, the parent organization of Culinary Workers Union Local 226 in Las Vegas, started a website called Red Rock Resorts / Station Casinos IPO Dissected which contains warnings such as "Outside Investors Should Demand a Cap on Cash Payments to Insiders," "Selling Growth While Cashing Out," and "Do You Want to Be a Second-Class Shareholder of Red Rock Resorts?"

Some of these warnings made it yesterday to the investing website Seeking Alpha where Clark Schultz wrote:

Warning issued on Red Rock Resorts IPO

The Red Rock Resorts (Pending: RRR) IPO is the target of unions and Deutsche Bank watchers who maintain that insiders will cash out at a high price.

The groups warn that IPO funds aren't being targeted to fund growth and new development or reduce debt levels.

With the Culinary Union previously maintaining a UFC = Unfit for Children website and still maintaining Zuffa Investors Alert, these warnings may need to be taken with a grain of salt, but the investing community is clearly aware.

The IPO was postponed on Jan. 28th due to recent market conditions but Red Rock has already filed another, similar amended S-1 with the SEC. Whenever the IPO process ramps up again, Frank Fertitta will no doubt have to successfully sell Red Rock's business model and the use of IPO proceeds to potential investors in order to keep the concerns from negatively affecting Red Rock's pricing range.

Bloody Elbow will keep readers up to date on the Red Rock IPO as events develop

Paul is Bloody Elbow's analytics and business writer. Follow him @MMAanalytics.