Wynn Capitalizing on Stock Rally, Selling up to 6.32 Million Shares to Raise Cash

Posted on: February 8, 2021, 06:55h. 

Last updated on: February 8, 2021, 10:49h.

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

Wynn Resorts (NASDAQ:WYNN) is taking advantage of recent strength in its stock, announcing Monday that it’s selling up to 6.32 million shares of equity to bolster cash.

Wynn share sale
Wynn Las Vegas, seen here. The company is selling equity following a nice run by the stock. (Image: Las Vegas Review-Journal)

News of the share sale comes after Wynn stock gained 17.54 percent last week and with the name residing just 15 percent below its 52-week high. That milestone was last seen during the early stages of the coronavirus pandemic, before the gaming company was forced to temporarily shutter its two Macau integrated resorts in February 2020.

Wynn Resorts intends to grant the underwriters a 30-day option to purchase up to an additional 825,000 shares of common stock,” the company said in a statement.

The stock closed just under $117 last Friday, meaning that if the company sells 6.32 million shares, it will raise $740 million. Deutsche Bank Securities, Goldman Sachs, and Bank of America Securities are managing the share offering.

Striking While Iron is Hot for Wynn Stock

It’s not uncommon for companies in a variety of industries to take advantage of stock rallies by selling new shares to raise capital.

For investors, these transactions can be good news/bad news scenarios. The negative for current shareholders is that they’re diluted by the influx of new shares. But the positive is that Wynn isn’t issuing debt, meaning new liabilities aren’t being created.

That’s meaningful for Wynn investors because when the operator delivered fourth-quarter results last week, it said current and long-term debt stood at $13.07 billion as of Dec. 31, 2020, with cash and cash equivalents of $3.48 billion.

The capital raise is potentially important for another reason.

On last week’s earnings conference call, Wynn CEO Matt Maddox spoke glowingly about the future of Macau — the company’s most important market. It’s possible that some of the cash raised in the share sale will be allocated to operations in the special administrative region (SAR), which could prove impactful ahead of the gaming license renewal process.

Analyst Chatter

Wynn’s equity sale announcement coincides with a busy day of analyst commentary on the stock. Before the open of US markets today, Credit Suisse analyst Ben Combes lifted his price target on the Encore operator to $99 from $80, while maintaining a “neutral” rating. He views increased COVID-19 vaccine distribution and easier Macau comparisons as catalysts for the stock.

Deutsche Bank analyst Carlo Santarelli reiterated a “buy” on Wynn while boosting his price forecast on the name to $125 from $120.

Last Friday, Citi analyst George Choi upgraded the gaming stock to “neutral” from “sell,” with a price estimate of $110, up from $99.