Below is a note written by Gaming, Lodging & Leisure analyst Todd Jordan on why we're removing Wynn Resorts (WYNN) from Investing Ideas today:
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Steve Wynn has not been tried in a court of law and it’s unclear if he’s done or is being charged with anything illegal. Unfortunately, many people seem to want to do away with due process and we certainly don’t want to judge the man without knowing all the evidence. What we can say is that we know some of the WSJ reporters who wrote the article describing Wynn’s alleged sexual misconduct. They are reputable. We’re also aware of the rigorous fact checking that the WSJ requires before an article can be published. In other words, the story is worth further investigation. Indeed, gaming regulators from MA and NV and the WYNN BOD have all announced investigations. Steve Wynn may not have done anything illegal, but because of these allegations, his company is in trouble. The stock fell 10% Friday, is that enough to compensate for the risk? There are so many ways this could go, most of them negative for the stock. As of now, Steve Wynn and the company are denying the allegations. But gaming regulators have a lot of power and don’t need illegal behavior to force change from a company operating in its jurisdiction. Could Wynn’s gaming license get pulled in MA or even NV? It’s difficult to say but we’re not willing to stick around to find out. We think this situation could ultimately lead to Steve chucking it all and selling the company. It may be the easiest way out and potentially the most lucrative for him. LVS and MGM are potential buyers and you better believe they are considering it. From an operations perspective, the company is in great hands, particularly in Macau, WYNN’s most important market. But Steve is the face and the heart and soul of Wynn Resorts. He’s the developer, the procurer of new licenses and opportunities, a historical creator of immense shareholder value – he is the brand. If he doesn’t step down, the company will face significant hurdles: boycotts, protests, regulatory or even shareholder pressure to step down or even sell assets. Most scenarios aren’t good, so we’ll move to the sidelines. |
