Wynn Resorts Shows Surprising Strength in Offering

After announcing a plan on Monday for a public offering of 7 million shares (see here), Wynn Resorts Limited (WYNN) surpassed expectations on Tuesday by successfully offering 9.6 million shares of common stock at the price of $19.00 a share. (See here). The shares constituted 8.6% of total shares outstanding. The public offering raised in excess of $175 MM in working capital for general corporate purposes.

The success of WYNN'S secondary offering comes at a time when competitor MGM Mirage (MGM) has been forced to obtain a debt waiver after reporting a 4Q loss of $1.15 BB, a loss which translates to $4.15 a share for a stock currently trading at $3.03. (See here). It has been reported that the debt waiver is effective through May 15th. Significantly, during MGM'S recent conference call, Chief Executive Jim Murren stated, “We can provide no assurances that we will be able to obtain additional covenant relief.” (See here).

By contrast, WYNN'S shares now trade at a premium to the $19 secondary offering price. As of closing on Tuesday, investors had bid the stock up to $20.72. (See here). Note that the amount of cash of $175 MM raised in the offering by WYNN is more than the $98.2 MM in cash held by Boyd Gaming (BYD) at the end of last year. (See here). Far from being a shorting candidate (See here), WYNN is showing signs of strength versus its peers.

Disclosure: Author does not own WYNN, MGM, or BYD

Comments

[whidbey:]

It is interesting to see some life in Wynn. But I suspect it is more a hedge in the gaming industry than confidence in WYNN. When the game stocks come back I suspect LVS, WYNN, BYD and a couple of Macau operators will be the place to be.

The thing to watch is internet gambling which could cut the ground under the great houses. The bills for internet play are in draft and the states are hot for the added taxes. Expect it to happen.

Mar 18 02:03 PM

[lowtechie1:]

Agreed. And gaming is sinking like a brick, month after month. Pit bosses elude to drops of up to 50% from months prior at MGM properties. When the public gets a gander at the real numbers in the next immediate quarter, they will understand MGM and Harrahs/Caesars and Stations bankruptcies. Harrahs should have already filed. $23 billion in debt and mounting.......my gawd !! Station has already filed. And Dubai/Infinity is waiting to pounce on a larger percentage control on Project CityCenter (MGM) as they will come up with some cash soon, or at least immediately after MGM files. I suspect the filing to be early May 2009. Just a guess. I think Dubai has played MGM all along. They are sharpies, for sure. Despite their own woes back home, they should prevail. Kirk is toast. After the incredibly dumb move on Ford as it was sinking, secured by sinking MGM shares, he is toast.

Mar 24 03:19 AM

[Robert Wein...:]

Good article by the author.

I have been following LVS, and BYD for over a year and they are both slow along with the rest of Vegas.

I am long LVS and short BYD put options so I do not believe that either will file for BK. I also agree with the author that WYNN appears to be the strongest or at least one of the strongest casino stocks you will find out there.

Mar 31 09:05 PM