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Wynn CEO commends Tilman Fertitta’s purchase of casino stock

Houston billionaire Tilman Fertitta

Wynn Resorts CEO Craig Billings has applauded Houston billionaire Tilman Fertitta’s move to acquire a large chunk of the company’s stock. As a result of the purchase, Fertitta Entertainment now owns 6.1% of the shares of the Vegas-based casino operator.

According to a Schedule 13G report with the Securities and Exchange Commission (SEC), Fertitta, his company, and another entity bought around 6.91 million Wynn shares in October. A part of the billionaire’s purchase was reportedly made while Wynn was buying its own stock.

During the third quarter, the casino operator repurchased $29 million of its shares. This increased Wynn’s year-to-date repurchase tally to a total of $166.4 million.

According to the closing stock price on the transaction date, Fertitta’s investment was around $385 million. This placed the Fertitta Entertainment Inc. CEO as the second highest investor in Wynn with 6.1% shares. Elaine Wynn is at the top, with shares of around 8.9%.

Fertitta is the sole owner and chief executive officer of Fertitta Entertainment Inc. The billionaire also boasts ownership of the Houston Rockets NBA franchise and the Landry’s restaurant empire with several other restaurant brands. This includes the Golden Nugget Casino operations in several states, such as Nevada and New Jersey.

Billings, the CEO of Wynn Resorts, shared his thoughts concerning the billionaire’s purchase during the Wednesday third-quarter earnings conference call of Wynn Resorts.

“Well, I guess what I can say is kudos to him (Fertitta) because he’s done quite well. 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),” Billings said.

According to a published report on the billionaire’s purchase by John DeCree, Las Vegas gaming industry analyst, the move was a passive investment. The analyst also posited theories that claimed that Fertitta’s purchase was his first move towards effecting a corporate takeover.

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Billings seems to think it is the former and revealed that during the second quarter, Wynn monitored transactions that indicated stock accumulation. Due to the 8.31% rally, the company’s stock rose by 22.64% in the past month. This placed Fertitta’s investment firmly in the green.

“Based on what we’ve seen watching our share register as we do constantly, sometime in Q2, we began seeing accumulations really by certain banks that have traditionally been associated with derivative transactions,” the CEO said.

“We watched those banks establish positions in our stock, and we were well aware of them. All in all, I think it’s just a great recognition of the value of our equity. There’s not much more to say about that.”

DeCree’s report pointed out that if Fertitta purchased Wynn stock as a casual investment transaction, the move was contrary to the billionaire’s previous actions when taking over companies. The analyst cited previous initial investments in organizations like McCormick & Schmick’s and Morton’s Restaurant Group, which led to corporate takeovers.

The 13G filing notably indicated Fertitta’s purchase as a passive stake. The Houston billionaire is yet to mention his plans concerning the Wynn investment or his reason for it. The casino operator has also not revealed that it is in talks for a takeover or is in the market.

During the third quarter earnings call, Billings did not say if he had spoken to Fertitta concerning the businessman’s sizeable investment.

If Fertitta decides to go after a takeover of Wynn, he will face a number of difficulties. The Houston Rockets owner will possibly have to tap capital markets in order to pay for a massive chunk of the purchase price. Fertitta Entertainment may also be saddled with junk-rated debt.

Analysts revealed that Fertitta could use the plot of Strip land for the construction of a new gaming venue as a bargaining chip for the Wynn takeover if it ever happens.

According to Wynn’s third-quarter earnings report, the company had a net loss of $142.9 million. It also recorded $1.27 a share and $889.7 million in revenue for the period, which came to an end on September 30. This year’s loss is lower than the amount recorded for the same period in 2021.

In Q3 2021, Wynn recorded a net loss of $166.2 million, revenue of $994.6 million, and $1.45 per share. According to Billings, the 10.5% revenue decline is a result of its three subsidiaries in Macao and other properties, which underwent a 12-day COVID-19-related shutdown in July.

“It continues to be challenging in Macao, and our results have reflected that,” the CEO said.

Wynn’s Las Vegas and Boston casinos, however, saw increases in recorded revenue. The two casinos reported $68.4 million and $19.6 million improvements, respectively, over the past year.

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