Wynn: “The End of an Era”

That’s how Deutsche Bank analyst Carlo Santarelli headlined his investor note alerting stockholders to the news that Wynn Resorts CEO/Chairman Steve Wynn has opted to step down. One can only speculate, but Carrie Geer Thevenot‘s long-buried Las Vegas Review-Journal report on Wynn’s “I love grannies” sexcapade was the pinkie-shove that sent Wynn tumbling into a rapidly deepening abyss. The move does not imply an acceptance of responsibility on Wynn’s part. He blamed it on “an avalanche of negative publicity … in which a rush to judgment takes precedence over everything else, including the facts.” Wynn Resorts President Matt Maddox moves into the void — and it is a big one — left by Mr. Wynn’s departure. “Steve Wynn is an industry giant.  He is a philanthropist and a beloved leader and visionary. He played the pivotal role in transforming Las Vegas into the entertainment destination it is today,” said board member Boone Wayson by way of a goodbye note. Wayson also implied that the Wynn brand will remain on the company’s various and sundry casinos, tainted though it is. One analyst wrote, “We think it stays in Macau, but we are less certain in Boston and, to a lesser degree, Las Vegas.”

While Wynn’s resignation removes some of the regulatory pressure faced by the company in Macao and Nevada, it’s far from beingout of the woods. The Massachusetts Gaming Commission has made it clear that it didn’t like being played for saps in the matter of a concealed $7.5 million payment to a manicurist who “said that when she went to his office for an appointment in 2005, he pressured her to disrobe, lie on his massage table and have sex.” Steve Wynn so far to hush the matter up that he funneled the $7.5 million through a shell company, “Entity Y,” created for that express purpose. If it’s lucky, Wynn Resorts pays a big fine in the Bay State and Wynn Boston Harbor lives to count its blessings.

Wynn Resorts’ internal probe is probably moot and the New York Times‘ “Deal Book” is fairly scathing about corporate governance at Wynncore, noting that “The board did not have a track record for holding Mr. Wynn accountable.” It even said it was “reluctantly” accepting his resignation of a “beloved leader and visionary,” suggesting that the fix was in. Harvard University law professor Lucian Bebchuk “asked why the board did not suspend Mr. Wynn from his position pending the investigation, or demand that he not interact with Wynn Resorts employees, a step that would have limited his ability to influence the board investigation.”

Reuters‘ Jeff Goldfarb called the board’s conduct “tone deaf” and suggested that the company may be even more of a takeover target than ever. Wynn still controls 21% of the
stock, so a takeover would be easier said than done. “Newly installed Chairman Boone Wayson extolled the mogul’s professional accomplishments at length. It would have been wiser to stick blandly to the facts,”Goldfarb wrote. As for the promotion of longtime sidekick Maddox, it “suggests little concern that the claims against Wynn could point to any broader cultural problem in the workplace.”

“The Wynn Resorts team and I have built houses of brick,” wrote Wynn in parting. “Which is to say, the institution we created — a collection of the finest designers and architects ever assembled, as well as an operating philosophy now ingrained in the minds and hearts of our entire team — will remain standing for the long term. I am extremely proud of everything we have built at this company. Most of all, I am proud of our employees.” Never mind that it was the employees, at least the ones Wynn preyed upon, brought him down.

Wynn Resorts stock responded positively to the news, jumping 7% upward in early trading. Wrote Santarelli, “the market has anticipated this and we believe most negative scenarios for the Company are removed from the table with this announcement.” He added, “While the news seems surreal, it wasn’t difficult to imagine this day would come, given other situations of this sort in recent months. As we’ve previously noted, we believe the current operations are in more than capable hands. Where we believe Mr. Wynn’s talents will be most missed are in the design and development aspects and as such, we’ll be interested to see how the pipeline plans of the Company shift from here. Our discussions with management implied no change in the current agenda, though it remains early days,” throwing in a vote of confidence in Maddox for good measure.

Sanford Bernstein analysts were less sanguine. “Mr. Wynn is the Wynn. Without him, the Wynn Resorts … is a different operation,” they wrote. Even Wynn Resorts has conceded “If we lose the services of Mr. Wynn, or if he is unable to devote sufficient attention to our operations for any other reason, our business may be significantly impaired.”

“We think this separation reduces WYNN (the company’s) negative regulatory risk outcomes meaningfully (not to zero, but a great deal, in our view, with respect to license
suitability/revocation risk in NV, MA and Macau as well as other potential negative outcomes in Macau),” wrote Joseph Greff of JP Morgan, who predicted an “orderly” unwinding of Steve Wynn’s ownership stake, which also includes Elaine Wynn’s shares, which he controls for voting purposes (an arrangement that rankles the latter no end).

Wynn was one of three genuinely transformative figures in Las Vegas during my time. (The others were Sheldon Adelson and George Maloof.) He went from running a bingo parlor with Elaine Wynn — can you picture Steve Wynn calling bingo numbers? — to presiding over a casino empire that spans half the globe. His opening of The Mirage in the face of a Las Vegas that openly wanted to see him fail turned out to be Sin City’s single most consequential even of the last 40 years. The “casino-based destination resort,” as Wynn called it, became the template that everyone else soon rushed to emulate, not always successfully. (Think Aladdin.) If it weren’t for Wynn, most casino owners would be stranded out in the desert, scratching their butts and trying to figure out where they left their car keys. But power corrupts and Wynn’s power was absolute. No casino leader soared so high nor fell so fast. ‘Nuff said.

As to future, we’ll see someone move to fill the power vacuum created by Wynn’s departure … and I’m not talking about Matt Maddox.