Wynn Resorts, Limited (NASDAQ:WYNN) had finally turned the corner. After spending tons of money to build a Macau property, the Chinese government decided to crack down on corruption and the rich whales who go to Macau, and WYNN stock paid the price.
The crackdown gummed up Macau’s works for every company for years. Finally, the period passes, Macau numbers finally start climbing, WYNN stock triples off its low… and Steve Wynn gets hit with sexual misconduct allegations, taking WYNN stock down 20%.
What Steve Wynn’s Alleged Misconduct Means to WYNN Stock
I’m not here to debate the allegations, but to examine what effect they may have on WYNN stock. It’s unfortunate, because CEO Steve Wynn is not merely a fantastic businessman, he is, perhaps, the most knowledgeable living person when it comes to Las Vegas and resort properties in general. I’ve been to Wynn properties many times and they always deliver in every way.
And they will continue to deliver.
The question is how long this negative PR issue is going to last and how it will affect Wynn Resorts stock.
China Effect
The first issue is how it may affect WYNN business. China will wag its finger, having now lost influence in the White House, as Wynn was close to both President Xi and President Trump. WYNN will keep its Macau properties, but China will demand all kinds of additional payments in 2019, when operating licenses come up for renewal.
That will be a one time hit, though.
Massachusetts Effect
Massachusetts is in a bit of a pickle. Wynn Boston Harbor is under construction and due to open in 2019. An emergency meeting of the Gaming Commission has been called. Expect them to issue some form of delay on the property. But here’s the thing: if they pull Wynn’s license, it will invite litigation. Moreover, the state badly needs the tax revenue the property will generate, so it can’t just shut the whole thing down.
I suspect there will be a long delay. If no criminal charges are filed, then eventually things will proceed as planned, as the allegations eventually are replaced on the front page by other stories. My guess is that, assuming no criminal charges are filed, once the mid-term election rancor heats up, this will be forgotten or quietly settled.
I doubt anybody going to Las Vegas is going to clutch pearls at the idea of staying at Wynn’s resorts. Not to diminish the seriousness of the allegations, but this is the city whose trademarked tagline is “What happens in Vegas, stays in Vegas”.
Saying one refuses to stay at a Wynn resort because of these allegations, in a city once run by the mob, where there are strip clubs around every corner, vice and sin are on overload and prostitution is tacitly legal, is ridiculous. There may be a very short-term downtick in revenue, but it will vanish quickly, especially if rooms get heavily discounted.
Bottom Line On Wynn Resorts Stock
Does Steve Wynn get pushed out? Doubtful.
The Board of Directors will conduct their investigation and do the right thing. Yet, ultimately, if he is pushed out, there are plenty of capable people at Wynn Resorts. Wynn himself would likely be still involved since he’s a major shareholder, and if he went on a sabbatical and returned in a couple of years, that wouldn’t surprise me, either.
All in all, it’s a non-story as far as WYNN stock is concerned.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
