Wynn CEO Craig Billings Applauds Tilman Fertitta Prescient Buy of Casino Stock

Posted on: November 11, 2022, 04:31h. 

Last updated on: November 11, 2022, 04:47h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Among the recent, eye-catching headlines in the gaming industry is the revelation that Tilman Fertitta’s Fertitta Entertainment now owns 6.1% of the shares outstanding in Wynn Resorts (NASDAQ:WYNN). Wynn CEO Craig Billings applauded the move by his competitor.

Fertitta Wynn
Tilman Fertitta at a 2019 news conference. Wynn CEO Craig Billings applauded him for being shares in the company. (Image: ESPN)

A Schedule 13G filing with the Securities and Exchange Commission (SEC) indicates Fertitta Entertainment, Fertitta himself, and another entity purchased 6.91 million shares of Wynn in October. Coincidentally, some of Fertitta’s buys occurred while the casino operator was purchasing its own stock. The Encore operator bought back $29 million of its own shares in the third quarter, bringing its year-to-date repurchase tally to $166.4 million.

Well, I guess what I can say is kudos to him (Fertitta) because he’s done quite well,” said Billings on the company’s third-quarter earnings conference call. “Since he appears to have started acquiring in the second quarter when the stock was excessively cheap. It’s actually right around when we were buying back some stock as well that we reported in our second quarter Q (10Q).”

The Wynn chief executive added the company monitored transactions indicating accumulation in the stock during the second quarter. With the help of an 8.31% rally today, Wynn stock is higher by 22.64% over the past month, indicating Fertitta is almost certainly in the green on his investment.

Value Bet, But Fertitta May Have Other Plans

Like other gaming equities, particularly those with Macau exposure, Wynn endured its share of headwinds this year. But some market observers believe some of these names are inexpensive. Billings appears to agree that could be a reason Fertitta embraced the stock.

“All in all, I think it’s just a great recognition of the value in our equity. But there’s not much more to say beyond that,” he said on the call.

However, some analysts are speculating the Golden Nugget owner’s move into Wynn stock could be a precursor to something more substantial, including a possible takeover offer. The aforementioned 13G filing indicates a passive stake. But analysts noted Fertitta has a history of turning 13G’s to 13D’s — the SEC document required of activist investors.

Thus far, the Houston Rockets owner hasn’t commented on plans for his Wynn investment, and the company hasn’t said it’s in takeover talks, or that it’s even for sale. Billings didn’t say on the call whether or not he’s talked to Fertitta regarding the investment.

Wynn Acquisition Wouldn’t Be Easy

While it’s not immediately clear what Fertitta’s plans are for his Wynn investment, he’s now the second-largest individual investor behind only Elaine Wynn.

Should the billionaire decide to pursue a takeover of Wynn, it won’t be easy. He’d likely have to tap capital markets to cover a significant portion of the purchase price, and Fertitta Entertainment would likely have to take on junk-rated debt. In this environment, some banks may not want to extend large amounts of non-investment grade corporate bonds, particularly in the cyclical gaming industry.

Analyst said the plot of Strip land on which Fertitta is building a new gaming venue could be used as a chip in a possible Wynn takeover. But it remains to be seen if he’ll pursue that avenue.