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Investors in Penn National Gaming and Nevada's slot machines makers, however, are already stacking their chips.
Tuesday night's vote in Ohio reversed two decades of opposition to gambling in a state where residents rejected casino measures on four different occasions.
However, with the state facing a budget deficit and 10 percent unemployment, Ohio voters approved a referendum by a 53 percent to 47 percent margin that will allow one casino in each of the state's four largest cities. The casinos offer the prospect of 34,000 full- and part-time jobs.
"This is not going to be a savior by any means, but it's another brick in the wall," referendum backer Dan Gilbert, owner of the National Basketball Association's Cleveland Cavaliers, told The Columbus Dispatch on Tuesday night.
Construction on casinos in Cincinnati, Columbus, Toledo and Cleveland may not take place until next year, with openings in 2012. Ohio political leaders who opposed the referendum may be exploring legal challenges or could launch another referendum to replace parts of the measure.
"Although we expect legal challenges and market infrastructure to take 24 months, the development is bullish for Penn," Oppenheimer gaming analyst David Katz told investors.
Penn National, a racetrack and regional casino giant, bankrolled the campaign in support of the referendum, along with Gilbert, who is the founder and chairman of Quicken Loans.
Penn National will own and operate the casinos planned for Toledo and Columbus, investing at least $600 million to build the two facilities. It's estimated that each casino could house between 2,000 and 5,000 slot machines and 50 to 100 table games.
Ohio is requiring a $50 million licensing fee for each casino with a minimum investment of $250 million per location. The tax rate on gaming revenues will be 33 percent.
Still, analysts said resort-style casinos in Ohio are a slam dunk.
"The passage is a positive for Penn and for the equipment companies as it opens up a new market," Susquehanna Financial Group gaming analyst Robert LaFleur said.
Several analysts, including Katz and Janney Montgomery Scott's Brian McGill, said the casinos' opening could add up to $5 a share to Penn's stock price.
Investors agreed Wednesday.
Shares of Penn National, up as much as 10 percent during the day on the Nasdaq National Market, closed at $28.19, up $1.99, or 7.6 percent.
Some analysts thought that Penn National could end up operating Gilbert's casinos in Cincinnati and Cleveland.
"Clearly, we believe this is a home run for Penn National, but we believe there could be even more incremental opportunities in a potential management contract with Gilbert's properties, given his lack of experience in casino operations," Macquarie Securities gaming analyst Joel Simkins said.
Investors are also bullish on slot machine makers' prospects in Ohio, where up to 20,000 new slot machines could be added at the four casinos.
"Ohio represents a meaningful new market opportunity for gaming equipment and technology providers," Roth Capital Markets gaming analyst Todd Eilers said in a research report.
Ohio residents are expected to vote on a gaming referendum next year that could add 17,500 slot machines to the state's seven racetracks.
"With the passage of full casino gaming it might be less likely that there will be voter appetite to approve slots," Union Gaming Group principal Bill Lerner said.
Nevertheless, Tuesday's vote boosted equipment makers' stocks prices. Shares of International Gaming Technology closed at $18.60, up 8 cents, or 0.43 percent. Bally Technologies was up 72 cents, or 1.73 percent, to close at $42.41 while WMS Industries finished at $40.77, up 32 cents, or 0.79 percent. All three company stocks are traded on the New York Stock Exchange.
Ohio will become the 39th state to legalize casinos and would join neighboring casino states Indiana, Michigan, Pennsylvania and West Virginia.
Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
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