Opinion | Lucky for Wynn, what happens in Macau stays in Macau

What a difference a few time zones make. Shares in Wynn Resorts Ltd. fell 10.1 percent in the U.S. Friday after the Wall Street Journal reported that dozens of former employees had alleged sexual misconduct by the group’s founder and Chief Executive Officer Steve Wynn.

Investors in Hong Kong were far less concerned. Stock in Wynn Macau Ltd. was down just 4.8 percent at publication time yesterday, and only a sliver below its highest level in almost three years. That’s not all that much worse than the 1.5 percent fall in SJM Holdings Ltd., or MGM China Holdings Ltd., down 1.9 percent.

How to account for the difference? The two companies are intertwined: Wynn Macau provides about 70 percent of the U.S. parent’s revenue and Ebitda. Wynn is founder, chairman and chief executive of both, with his name over the doors in Trump-high letters. It’s hard to argue both don’t suffer profound key- person risk.

One possibility is just that more water has passed under the bridge, giving investors a chance to reassess how much their holdings are threatened. But the news broke four hours before the market closed in the U.S. on Friday – plenty of time for stateside shareholders to weigh the issue. With valuations for Wynn’s Macau stock around their highest level in four years after fourth-quarter results that beat estimates last week, there’s good reason to take some profit, even absent the Wynn factor.

It’s hard to escape the notion that investors in Hong Kong are simply shrugging off the story. Sin cities have long turned a blind eye to louche behavior, and members of Stanley Ho’s complicated family still have key roles in MGM China, SJM and Melco Resorts & Entertainment Ltd., three of Macau’s six licensed resorts. Traders seem only moderately interested: Turnover in Wynn Macau’s less-liquid pool of shares was about three times the three-month average on Monday, versus a 10-times multiple for Wynn Resorts.

That could prove a costly mistake. The determination behind whether executives are judged “fit and proper” to hold a casino license is notoriously opaque, but regulators do tend to look over each other’s shoulders. Wynn has already resigned from his role as finance chairman of the Republican National Committee. Should gaming bureaucrats in Nevada and Massachusetts decide he’s no longer squeaky-clean enough to hold a casino license, it’s hard to imagine Macau ruling that he is.

Investors are often warned that sexism is a financial, as well as reputational, risk. Companies with all-male boards missed out on about USD655 billion in returns on assets relative to more diverse ones in 2014, according to a study by Grant Thornton LLP.

Those tempted to play down the risks to Wynn Macau as a merely private matter would do well to heed that lesson. David Fickling, Bloomberg