A sale of Wynn Resorts could be the culmination of the operator’s tough last few weeks, according to Wall Street analysts. Nevada-based operator Wynn Resorts has been through a lot of negative press in the last few weeks after the Wall Street Journal’s expose on sexual harassment allegations against the Wynn Resort’s CEO and founder Steve Wynn.
Since the report was published, Steve Wynn has vehemently denied the allegations and has called out his former wife, Elaine Wynn for instigating these vile attacks in the media.
State Gaming Commissions Turn Up The Heat
The controversial report has already sent state commissions on the tail of Wynn Resorts to investigate the accusations. The Massachusetts Gaming Commission has been on the move since last Monday to review the license they granted to the company to build the $2.4-billion Wynn Boston Harbor Resort in Everett, Massachusetts. If they find Steve Wynn and his company not “suitable” for the license, the commission can revoke the company’s license and stop the construction of the upcoming resort.
The Nevada Gaming Control Board has also launched its own investigation of the matter and if Wynn is found guilty of the charges, they could ultimately force him out of the company and out of the industry. The backlash has not just been directed towards the gaming industry.
Wynn Resorts Paying A Heavy Price
Billionaire Steve Wynn has been one of the main donors for the Republican National Committee (RNC). The RNC came under pressure to return all of Wynn’s donations and US Senator Dean Heller has already donated the $5,400 that Wynn funnelled into his re-election campaign to charity.
The Republican Governors Association has been more aggressive against Wynn after the allegations and has returned the $100,000 contribution from Wynn Resorts. The group also cancelled its 2020 annual conference at the Wynn Las Vegas casino and hotel, and revoked the membership of Wynn Resorts in their corporate membership program.
British new-wave musician Elvis Costello has cancelled six scheduled appearances at Wynn’s Encore Theater. According to his website, all of his appearances from February 28 to March 10 have been cancelled.
In response to the massive backlash, Wynn Resorts drafted a special committee of independent board members and hired Los Angeles law firm O’Melveny & Myers LLP to assist in the investigations. The Wynn special committee will be headed by Pat Mulroy, the only woman aboard the 10-member group.
Wynn Resorts Loses $3.5 Billion Due To Allegations
The whirlwind of criticisms and cancellations has forced Wynn Resorts’ shares to tumble down to as low as $160 last week. Starting at $200 before the allegations were published by the Wall Street Journal, as of writing, Wynn is down to $166. Ever since the report, Wynn Resorts has already lost $3.5 billion in value.
With a dismissal decision from the Nevada regulator looming over Steve Wynn and the pressure from the stock market over-encumbering Wynn Resorts, Wall Street analysts say that the company could be heading to a sale.
In a statement, David Katz, analyst of global investment banking firm Jefferies said “Should Wynn step aside, the best possible outcome could be a sale of the company. The physical assets, land value and access to the Macau market would likely be attractive to other operators or private entities that invest in gaming.”
Gaming Rivals Keeping A Close Watch
The sale could open up opportunities for other gaming rivals to absorb Wynn’s gaming market share in Macau. Wynn Resorts’ two Macau casinos currently make up 70 percent of the company’s value and if a rival were to successfully acquire Wynn Resorts, they would end up controlling a massive stake in Macau’s gaming industry and the global gaming industry at large.
If Wynn Resorts were to be pushed to a sale, it will be the biggest acquisition in the gaming industry since Caesars Entertainment Corp was dissolved for $29 billion way back in 2008. But according to JP Morgan and Morningstar, a sale will only be possible if Wynn shares drop to $140 to $150 which would then bring the company’s value of $22 billion.
Once Wynn is made viable for a sale, analysts suggest that Las Vegas Sands Corp will be one of the strongest companies poised to acquire Wynn Resorts. Currently with a market capitalization of $62 billion, Las Vegas Sands has the debt capacity to purchase the company if they continue with the sale of 49 percent of its retail assets in Singapore. The retail assets were valued last year at around $3 billion.
If Sands was to push through with the acquisition, the company will be increasing its already five casinos in Macau to seven, further strengthening its dominance in the gambling capital.
MGM Resorts International, on the other hand, will have a much higher debt burden than it can handle if they move to acquire Wynn Resorts. Operators outside the US could also be potential bidders for Wynn Resorts such as Hong Kong-based Galaxy Entertainment Group and Malaysia-based Genting. Both companies currently have net cash positions and are able to raise billions of dollars in debt. Galaxy, who is currently looking to “explore international development opportunities,” could specifically benefit from an acquisition.