Question of the Day - 19 November 2022

Tilman Fertitta, owner of the Golden Nugget and a number of other businesses, brands, and major companies, paid an estimated $385 million for 6.9 million shares of stock in Wynn Resorts. The purchase gives Fertitta an ownership stake of 6.1% in the company. Only Elaine Wynn, who owns 8.9%, has more shares in Wynn Resorts.

Wynn stock hit a high of $96 in mid-February, then a low of $52 in late June. When Fertitta bought in, it was around $56, so it was very good timing. As of this writing, the share price is crowding $80 per share, so Fertitta has made upwards of $25 per share; 6.9 million shares times $25 per share is too high a money number for us to figure out, so it must be a lot!  

A few analysts have weighed in on the massive investment of one casino owner in another casino. Most seem to believe that it's just a stock play and, as stated above, so far it's been a good one. In addition, Fertitta might be counting on the stock rising further as Wynn's status in Macau is clarified (six licenses are up for rebids, with a seventh bidder, Genting, vying for one) and as Macau recovers from nearly three years of COVID-related uncertainties. 

Another idea we've seen floated is that Fertitta might be making a play for a Wynn partnership in, or perhaps development capital for, his new megaresort already going up on the south Strip. That seems unlikely, but it's out there in speculation land.

Finally, of course, it could signal some intention to launch a corporate takeover, which Fertitta has been known to dabble in in the past. CBRE analysts John DeCree and Max Marsh, in a note to investors, wrote, "It's not in the billionaire’s nature to retain passive investments. We look to his prior acquisitions, including McCormick & Schmick’s and Morton’s Restaurant Group, both of which started with 13G filings that culminated in full takeovers. Wynn is a more complicated endeavor, but the take-private saga of Landry’s from 2008 to 2010 (when Fertitta acquired all outstanding shares) is a good example of the investor's tenacity.”

Of course, given the potential complications, it's not a move that Fertitta is probably contemplating casually, but if he does make a play for the company, it will definitely be interesting to watch.

As for Wynn's response, in its third-quarter earnings call, company CEO Craig Billings said, "Kudos to him. He’s done quite well, since it appears that he started acquiring during the second quarter when the stock was excessively cheap. It’s actually right around when we were buying back stock as well," Billings noted, citing the company's own share buyback efforts. "It’s a great recognition of the value of our equity,” he concluded.