While investors are transfixed by the sexual harassment allegations swirling around Steve Wynn in the U.S., the key to Wynn Resorts Ltd.’s future sits on the other side of the world in Macau.
The billionaire stepped down as Republican National Committee finance chair over the weekend, following reports that the casino magnate had engaged in multiple instances of sexual harassment. The impact of the claims reverberated yesterday in Macau with Wynn Macau Ltd. shares slipping 6.5 percent in Hong Kong for the biggest drop in more than a year.
With the parent company facing investigations in the U.S. and calls for Steve Wynn’s ouster, here are some reasons why the scandal will be a big deal for Macau too.
CROWN JEWEL
Wynn Macau is the growth engine for its U.S. parent, generating more than 70 percent of Wynn Resorts’ business. Last week, the casino operator reported better-than-expected quarterly earnings as a surge in revenue from Wynn Palace on Macau’s Cotai Strip overshadowed weaker results out of Las Vegas.
MACAU RESURGENCE
Business is booming in Macau as high rollers have returned to the territory after a government crackdown. Wynn gained the most market share last year among casino operators with the resurgence of the elite gamblers, according to gaming data. Total gambling takings rose 19 percent in 2017, the first full-year of growth since 2013, and analysts are optimistic about the market this year with the opening of new resorts.
INCREASED
SCRUTINY
Any fallout from the allegations could have a major impact on Macau. Gaming regulators in Nevada and Massachusetts are looking into the accusations, and punitive actions in the U.S. could prompt Macau watchdogs to ramp up their scrutiny, said Wang Changbin, director of the Gaming Teaching and Research Centre at the Macau Polytechnic Institute. Upsetting the market by ousting an existing casino operator may be difficult, Wang added. Macau’s gaming law stipulates that the reputation of the operator and its controlling shareholder is considered in the bidding process for licenses.
Macau lawmaker Pereira Coutinho said Wynn’s situation shouldn’t create difficulty with its operating license, as the personal allegations don’t hurt the enclave’s image as much as more damaging industry scandals in the past that didn’t spur changes in the laws. “The former Portuguese colony is not responsive enough to solve problems that have caused negative impact to the society,” he said.
FOUNDER’S FATE
Some investors are calling for the company to oust Steve Wynn, raising the prospect of a volatile transition period. Bloomberg Intelligence analyst Margaret Huang says possible successors to the 76-year-old casino magnate include Linda Chen, chief operating officer of Wynn Macau. Wynn cited Chen as one of the company’s executives fit to take over when asked about a potential replacement in 2011.
ASIAN FALLOUT
The repercussions could be felt beyond Macau. Japan is opening up to casino resorts, and government officials are already sensitive to negative perceptions about the industry as they consider regulations and licenses for casino operators. MDT/Bloomberg
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