Melco Crown Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Macau casino operator Melco Crown Entertainment (NAS: MPEL) were hitting the jackpot today as investors pushed them up as much as 13% in intraday trading after the company announced that shares will start trading on the Hong Kong stock exchange.

So what: With Melco listed on an additional exchange, there will be more investors with access to shares. Current investors could have hopes that new demand will push up the share price.

More importantly though, in Melco's press release announcing the new listing, CEO Lawrence Ho made it clear that the company will not be selling new shares in conjunction with the offering. As share offerings dilute the ownership stake of current shareholders, investors generally react poorly to those announcements. The reverse has been true today for Melco, after Ho took the option off the table for now.

Now what: Since the new listing will not include the sale of new shares, it won't affect the underlying fundamentals of the company. However, some of the stock's reaction today may be coming from the market's readjusting of its expectations of a dilutive share sale.

That said, investors will want to stay tuned in. Because of the high capital needs of expanding casino companies, the company may yet use its new exchange outlet to raise money in the future.

Want to keep up to date on Melco Crown Entertainment?Add it to your watchlist.

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferhas no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter@KoppTheFoolorFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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