When a company’s stock price declines over an extended period of time, activist investors often step in and question management. That’s certainly the case with Penn Entertainment, which operates M Resorts, whose stock price has fallen more than 40% compared to its peers. Could Penn’s problems have an impact on other gaming companies, including Nevada operators?
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A Los Angeles-based investment firm has proposed selling all or part of its 43 casinos in 20 states to Penn Entertainment, sparking a firestorm of speculation.
Penn’s shares, which operate the M Resort in Henderson and two rural casinos in Nevada, rose 20 percent after Business Wire published a letter sent by Donerail Group to the company’s chairman on May 31. The letter has generated buzz because managing partner Will Wyatt wrote that “value could be realized” if the company were put up for sale.
Wyatt complained that the company had invested $4 billion in online gaming and sports betting over the past four years with little return, and he suggested selling the casinos would help restore shareholder value.
And while the gaming acquisition market has been relatively quiet over the past 18 months, analysts have been rife with speculation about a potential mega-merger.
“We expect bidders will emerge, although the levels of interest will vary,” Deutsche Bank gaming analyst Carlo Santarelli said in a June 7 research note on the overall merger market after meeting with executives from eight Las Vegas casino operators. “We believe the current environment will likely require creative structuring.”
Last week, the seemingly innocuous announcement that Boyd Gaming had added former investment banker Michael Hartmeyer to its board of directors ignited already smoldering speculation about Penn.
Don Bilson, an analyst at Gordon Haskett Research Advisors, said the appointment of Hartmeyer, a director who oversaw transactions in the lodging, gaming and leisure sector, suggests the company is considering buying all or part of Penn, as reported by Seeking Alpha.
A Boyd spokesman said the company does not comment on speculation.
Boyd operates 28 casinos in 10 states, overlapping with Pennsylvania in many of the same regional markets. As for Nevada, the company, which has 10 properties in the Las Vegas area, could be interested in M Resorts in Henderson.
Gaming sources said last week that the University of Pennsylvania is seeking a buyer for the 390-room M Resort, which is undergoing a $206 million expansion that will include adding a second hotel tower and adding meeting space and other amenities. The University of Pennsylvania announced its expansion plans in October 2022 and broke ground last December.
Boyd runs the small Joker’s Wild casino on Boulder Highway in Henderson, but the M Resort would give the company a location further west, accessible from Interstate 15. It’s doubtful Boyd will be interested in Penn’s two smaller casinos in the rural northeastern Nevada town of Jackpot.
The Barstool Sportsbook is photographed inside Penn Entertainment’s Ameristar Casino in Black Hawk, Colorado, on Monday, Aug. 15, 2022. (Howard Stutz/Nevada Independent)
Barry Jonas, a gaming analyst at Truist Securities, has met with University of Pennsylvania management and wrote in a research note that he doesn’t expect the school to undertake a strategic review. He also suggested that “rising and volatile interest rates” would dampen any divestiture or merger activity.
“Penn is one of the most efficient land-based carriers in our coverage area,” Jonas wrote.
Penn does not operate sports betting in Nevada, but in two transactions over a three-year period, it acquired Barstool Sports for $551 million. The company struck a $1.5 billion deal with Disney Corp. and sold Barstool to its founders for $1 when it rebranded and relaunched its sports betting site as ESPN Bet. Penn also acquired the Score, a Canada-based sports media and technology company, for $2 billion in 2021.
“We do not disagree with much of what is contained in the letter,” JPMorgan gaming analyst Joe Greff wrote in a research note hours after the letter was made public.
A screenshot of the myVegas Strip homepage created by PlayStudios for its MGM Grand Las Vegas client. (Photo courtesy of PlayStudios)
Social gaming company PlayStudios to spend $24.6 million on stock buybacks
Las Vegas-based social gaming provider PlayStudios will buy back approximately 11.7 million shares of the company held by Microsoft Corp. The shares, which will be traded on the Nasdaq, will be sold to the company at $2.11 per share for a total consideration of $24.6 million.
Play Studios said in a statement that the sale will reduce the number of shares currently on the market by approximately 9%.
Matt Kaufman, an analyst at Eilers & Crasick Gaming, said the share purchase was an opportunity to use the company’s stock repurchase program.As of the end of March, Summerlin-based Play Studios had used just $4 million of the $50 million it had authorized for its stock repurchase program.
“Play Studios management has frequently stated their belief that the market is undervaluing their stock and that they [offer]” Kaufman said.
CEO Andrew Pascal said the deal will increase the value of Play Studios because the shares are being purchased at a discount. Play Studios’ closing price on the Nasdaq on Monday was $2.18.
PlayStudios offers free-to-play games on mobile devices, including casino-centric titles such as MGM Slots, Konami Slots and myVegas. Customers can purchase additional online tokens at a minimal cost to win “real-world prizes” such as trips and merchandise.
Macquarie Securities games analyst Andrew Li wrote in a May research note that Play Studios has about $130 million in cash, giving the company ample opportunity for share buybacks and mergers and acquisitions.
Department of Justice headquarters in Washington, D.C., Oct. 7, 2022. (Tim Leonard/Nevada Independent)
Appeals court rules Steve Wynn doesn’t have to register as a foreign agent
The US Court of Appeals for the D.C. Circuit has upheld a ruling that former casino operator Steve Wynn cannot be ordered to register with the Department of Justice (DOJ) as a foreign agent of China.
The ruling, announced by a three-judge panel on June 14, upheld a ruling issued in October 2022 by U.S. District Judge James Boasberg, who noted that all ties between Wynn and the Chinese government ended in 2017.
Bob Raskin, the lawyer who represented Wynn, told The Hill that the verdict was “a fitting closure to a lengthy ordeal for our client.”
The Department of Justice sued Wynn in May 2022, alleging that he lobbied former President Donald Trump and members of his administration on behalf of China while he was chairman of Wynn Resorts.
What I’m Reading
🏀 Las Vegas Casino Owner Wins NBA Jackpot — Robert O’Connell and Katherine Sayer, The Wall Street Journal
Miriam Adelson, majority shareholder of Las Vegas Sands, owner of the Mavericks, and her son-in-law Patrick Dumont, president of Sands, are focused on legalizing casinos in Texas, which is unlikely to pass legislation in 2025, with analysts saying the earliest a casino bill could be approved is 2027.
🎰 New York State Assembly passes bill to speed up casino construction process in the southern part of the state — Tom Nightingale, SBC America
The process of legalizing three Las Vegas-style casinos in the New York City area has dragged on for far too long.
🏗️ Will Bally’s planned $1.7 billion Chicago casino be built by 2026? Chances are slimming down — Robert Chanick, Chicago Tribune
“We are confident the project will be completed on time and within budget,” Bally’s Chairman Soo Kim said.
A sign advertising gaming components goes up at Akers Manufacturing Co. in Las Vegas on Dec. 10, 2021. (Jeff Scheid/Nevada Independent)
News, Notes, Quotes
Acres Introduces Cashless Gaming to Northern California Tribal Casino
Las Vegas-based Acres Manufacturing has installed its cashless gaming technology at Rolling Hills Casino & Resort in Corning, California, marking its first contract with a tribal casino. Acres has now installed the system in 11 states. The technology allows players to use a mobile wallet with a Bluetooth reader to place bets on slot machines and table games. Rolling Hills Casino is owned by the Paskenta Band of Nomlaki Indians.
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Analyst: Not enough changes for 2024 Las Vegas Grand Prix
Carlo Santarelli, a gaming analyst at Deutsche Bank, doesn’t expect to see much change in this year’s Las Vegas Formula 1 Grand Prix. After speaking with Strip gaming executives, Santarelli wrote in a research note that they expressed frustration that the 2023 race only benefits a few Strip resorts. They hope the initiative will also benefit properties not located along the race track.
But Santarelli wrote that there will be “no notable changes” for the 2024 season. [race] It will be a very different experience to 2023. We believe the possibility of single-day ticket sales would help and this is something that is being discussed.”
