Wynn Entertainment stock is up 15% in early trading Wednesday on the news that the CEO Steve Wynn bought 1 million shares of the company.
Wynn Entertainment’s stock price has plummeted in the last two years, dropping from a high of $246.65 in March 2014 to around $72 today.
That is the direct result of the Chinese government’s changed stance on gambling in Macau.
Over the last year and a half, the government has limited foot traffic to the island, started monitoring how much cash Chinese people use there, placed cameras in VIP rooms, limited the number of tables allotted to new projects, and scared off high-rollers concerned with getting ensnared in Chinese president Xi Jinping’s wide-reaching anti-corruption drive. Casino revenues have plummeted.
That makes Wynn’s share purchase especially meaningful.
“Given this is the first meaningful insider purchase and the first sizeable open market purchase by Mr. Wynn in some time, and given current short interest levels (18% of the float), it should come as little surprise that shares are up,” Deutsche Bank wrote in a note following the purchase.
“Furthermore, in our view, anytime a CEO buys a meaningful stake it sends a favourable message. However, in this instance, and assuming the shares are included in the unilateral agreement, which makes selling very difficult, we view the message as that much more forceful.”
Wynn has only two properties, one in Las Vegas and one in Macau. The Macau casino is hurting, and so Wynn is hurting.
For months protestors have been picketing outside the Macau property. They’re investors demanding to be paid after a thief absconded with millions of dollars from a VIP room which was then shut down. In Macau VIP rooms are funded by junkets — companies that pool people’s money to lever up high-roller bets and share the profits with investors.
The junket that was robbed, Dore Entertainment, didn’t owe Wynn any money, but the robbery hurts all the same.
One can imagine that this is probably not the most favourable environment to open a new casino, but that’s what Wynn is slated to do next year. There’s a ton of uncertainty. The government allotted a project that opened earlier this fall fewer tables than expected, and no VIP tables whatsoever.
It’s clear that Wynn isn’t sure what’s going to happen to his project, which should open in June after a three month delay.
“It’s become a major issue in Macau … the impact of government policy in planning,” Wynn said on a conference call in October. “None of us are really clear as to what our environment will be going forward. It makes planning and adjusting almost a mystical process.”
What isn’t mystical, though, is the fact that Wynn now owns 11% of the outstanding shares in his company.
Don’t be surprised if he buys even more.
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