Rumors aren’t always negative. Take Steve Wynn as an example.
Shares in the gaming company soared from $99.81 to $106.17 in a single day due to a recent rumor that fellow casino billionaire Sheldon Adelson was planning to buy Wynn’s Nevada casino resorts, Wynn and Encore.
Wynn stocks have previously enjoyed benefits from sale rumors. This was notably true in 2015 when Jim Cramer, the host of Mad Money, proposed that Wynn and MGM Resorts were planning a merger, leading to a seven percent increase in Wynn stock prices.
Though there is a rumor about a potential sale, this is not the first time speculations have surfaced about Wynn possibly selling. However, similar to previous occasions, the current rumor does not appear to have much credibility. A Wynn representative, when interviewed on Bloomberg News, denied the truth of the rumor.
Adelson’s status as top casino billionaire holds financial weight
It should be highlighted that even the slight idea of Sheldon Adelson potentially buying Wynn and Encore can cause prices to soar. His leading position in the casino industry was further amplified when Forbes declared him the most affluent casino billionaire.
In the 2017 Forbes Billionaire edition, Adelson was ranked as the wealthiest casino owner and placed 20th among the world’s richest individuals. His net worth, valued at over $30 billion by the publication, fluctuates by millions daily.
Lui Che Woo of Galaxy Entertainment is the next highest person from the casino industry on the list, ranking 109th, in comparison. Meanwhile, Wynn is ranked 814th overall.
Adelson’s net worth would only increase further with an acquisition at the level of the Wynn.
Is Wynn Resorts in financial trouble?
One question stoking the rumor is if Wynn needs to offload the Las Vegas properties for financial reasons. The company’s financial stability has been questioned over the last few years, however, the success of Wynn Palace in Macau has helped to steady the financial situation.
Despite the escalating costs and problems associated with the impending Wynn Boston Harbor, Wynn appears untroubled and has already begun tackling new projects, risks, and expansions.
The company’s earnings, courtesy of Wynn Palace and the earlier-established Wynn Macau, provide capital for future projects. Recently, Mr. Wynn declared his intention to utilize these funds in the expansion of his Las Vegas resorts. The upcoming Paradise Park project, set to be located behind Wynn and Encore, will include entertainment and retail elements but will not offer gambling.
Wynn excels at generating income from non-casino aspects of the resort. As a result, The Motley Fool, a financial news platform, believes that Wynn shareholders have no cause for concern.
Both Wynn and Sands should not rely on Macau revenue
Adelson and Wynn might not be collaborating in Vegas, but they could be on the same page in terms of Macau gaming.
The Wall Street Journal recently published an article (behind a paywall), explaining the potential challenges that US casino companies could face in renewing their gaming licenses in 2022.
- Licenses currently in effect can only be extended for a duration of five years.
- Local casinos are exerting pressure to restrict international business.
- Potential for tax hikes
- Heightened competition from neighboring foreign markets
Specifically, Wynn has a significant amount of debt leveraged against its holdings in Macau. The company could face serious financial issues if it does not plan and prepare for potential changes before its renewal.
