Casino stocks in the U.S. rose this week on the back of a news report that suggested an activist investor in U.S. casino giant MGM Resorts International was pushing for the sale of the firm’s Macau properties.
The story was first reported by the New York Post and then picked up by several news outlets, including the Financial Times and Bloomberg, which said that people familiar with the matter had denied Starboard owned any MGM stock, but that the fund had refused to comment
According to the New York Post and several investment websites, U.S.-based hedge fund Starboard Value had allegedly amassed a USD500 million-plus stake in MGM Resorts International, the majority shareholder in MGM China, with the intention of getting a seat on the board and pushing for big changes in the company.
The Post reported that one of Starboard’s ideas involved selling MGM China’s two properties and exiting Macau. Another would be to merge the firm’s MGM Growth Properties real estate investment arm with rival Caesars’ equivalent.
MGM China owns two properties in Macau; an original site on the peninsula and a newer property in Cotai.
Previously, MGM Resorts advised shareholders not to back board candidates offered by specific hedge funds.
In early 2015, the company called on shareholders to reject a candidate from a New York hedge fund that had suggested converting the company’s land holdings into a real estate investment trust. However, later that same year, MGM Growth Properties was founded.
MGM Resorts could not be reached yesterday for a comment.
Analysts say that move is not unusual activity for Las Vegas, where other activist investors have recently been doubling down.
The city has seen a downturn in casino revenues in recent months and shares of big players MGM Resorts, Sands Las Vegas, Caesars and Wynn Resorts are each double digits down for the year. But investors are hopeful that a recovery is close to hand.
MGM Resorts is the dominant player on the Las Vegas scene, but has less exposure in Macau than American rivals Las Vegas Sands and Wynn Resorts.
It will be the first of the three U.S. operators to have its concession expire in 2020, alongside Stanley Ho’s SJM Holdings, while Las Vegas Sands and Wynn Resorts will have two more years. DB