How Realistic Is The Rumor That Sheldon Adelson Is Buying Wynn And Encore?

Posted on March 25, 2017

[toc]Rumors are not always a bad thing. Just ask Steve Wynn.

Thanks to a recent rumor fellow casino billionaire Sheldon Adelson was going to buy Wynn’s Nevada casino resorts Wynn and Encore, shares in the gaming company spiked from $99.81 to $106.17 in a single day.

This is not the first time Wynn stocks benefited from a sale rumor. In 2015, Mad Money host Jim Cramer suggested Wynn and MGM Resorts were merging. The rumor drove Wynn stock up seven percent.

Is there any truth to the sale rumor though? This is not the first time suspicions arose Wynn might sell, but just like the other instances, this one does not seem to hold much weight. A Wynn representative said there was no truth to the rumor when interviewed on Bloomberg News.

Adelson’s status as top casino billionaire holds financial weight

It is worth noting the mere notion Sheldon Adelson might be purchasing Wynn and Encore is enough to send prices up. His status as the top dog in the casino industry got boosted even further when Forbes proclaimed him the number-one casino billionaire.

In the 2017 edition of Forbes Billionaire, Adelson topped casino owners and ranked 20th on the list of wealthiest people in the world. The publication values his net worth as over $30 billion, a number that fluctuates by the millions every day.

By comparison, the next highest casino industry person on the list is Lui Che Woo of Galaxy Entertainment at 109th. Wynn ranked 814th overall.

An acquisition on the scope of the Wynn would only boost Adelson’s net worth even higher.

Is Wynn Resorts in financial trouble?

One of the questions fueling the rumor is whether or not Wynn needs to sell the Las Vegas properties for financial reasons. The fiscal stability of the company was in question the past couple of years, but the success of Wynn Palace in Macau helped stabilize financials.

There are still ballooning costs and issues surrounding the forthcoming Wynn Boston Harbor, but Wynn does not seem concerned and is already taking on new projects, risks, and expansions.

Thanks to Wynn Palace and the older Wynn Macau, the company has earnings to work with. Mr. Wynn recently announced plans to use those funds to expand the Las Vegas resorts. The new Paradise Park project will be situated behind Wynn and Encore and feature entertainment and retail, but no gambling.

Wynn is particularly adept at generating revenue from elements of the resort that are not the casino. This is why financial news outlet The Motley Fool thinks Wynn shareholders have nothing to worry about.

Both Wynn and Sands should not rely on Macau revenue

Adelson and Wynn may not be joining forces in Vegas, but the two may be in the same boat when it comes to Macau gaming.

In 2022, both casino companies will have to renew their concessions (gaming licenses). A recent Wall Street Journal article (paywall) detailed why the renewal process could prove difficult for the US companies:

  • Currents licenses can only be extended for five years
  • Pressure from local casinos to limit international business
  • Potential for tax hikes
  • Increased competition from nearby foreign markets

Wynn, in particular, has substantial debt leveraged against its Macau holdings. If the company does not prepare for potential changes before renewal, it could actually be in serious financial trouble.

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Jessica Welman

Jessica Welman is a longtime member of the poker media. She has worked as a tournament reporter for the World Poker Tour, co-hosted a podcast for Poker Road, and served as the managing editor for WSOP.com. A graduate of the University of Southern California and Indiana University, Welman is not only a writer but also a producer. She has been involved for livestreams for the WSOP and WPT and worked as a consultant on many other poker productions. She can be found on Twitter @jesswelman.

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