Casinos and Gaming

Steve Wynn folds as Galaxy Entertainment buys in

Key Points
  • Steve Wynn sold his entire stake in Wynn Resorts.
  • Galaxy Entertainment Group took a 4.9 percent stake in the massive global gaming company.
  • Steve Wynn's complete removal from any kind of influence or association with Wynn Resorts could have a positive impact on the investigations ongoing in Massachusetts and Nevada.
Steve Wynn shows off the plans for a planned casino during a press conference on March 15, 2016.
Jessica Rinaldi | The Boston Globe | Getty Images

Steve Wynn has sold his entire stake in Wynn Resorts, the massive global gaming company he created.

In a period of two months, the visionary casino mogul was accused of a decades-long pattern of sexual misconduct, which he called "preposterous," resigned and now has divested himself fully of his stake in the company that bears his name.

Steve Wynn sold 4.1 million shares, roughly a third of his stake, on the open market for $180 per share. Then he sold his remaining 8 million shares in a private transaction with two longtime institutional investors, Capital Research and Management Company and T. Rowe Price Associates, for $175 per share. Though Wynn's separation agreement with Wynn Resorts prevented him from selling more than a third of his stake publicly in any quarter, without the company's consent, under certain circumstances a private sale was acceptable.

Additionally, Wynn Resorts newly issued 5.3 million shares of company stock to Galaxy Entertainment Group at a price of $175 per share. That represents a 4.9 percent stake in the company.

"This is a unique opportunity to acquire an investment in a globally recognized entertainment corporation with exceptionally high quality assets and a significant development pipeline," says Galaxy Entertainment Group Vice Chairman Francis Lui in a statement issued by Galaxy.

Instinet gaming analyst Harry Curtis says, "This could be the start of a much bigger relationship, a strategic investment, on the part of Galaxy."

Galaxy Entertainment has a massive casino presence on the Cotai peninsula in Macau. It is seen as the most local of the concessionaires in Macau — with the closest relationship with the central Chinese government. That preserves and creates upside scenarios for Wynn Resorts, especially ahead of concession renewal in 2022, amid wide speculation that the Chinese government would prefer more Chinese ownership in Macau.

Back in the United States — Steve Wynn's complete removal from any kind of influence or association with Wynn Resorts could have a positive impact on the investigations ongoing in Massachusetts and Nevada. Though, in Massachusetts, the lead investigator for the Gaming Commission has been clear that the suitability of the executives and the board is also under scrutiny. Questions continue to be raised about why the board failed to recognize or to take action on allegations against Steve Wynn regarding sexual misconduct in the company.

At least two private settlements were made between former employees and Steve Wynn and CNBC has been informed by multiple sources that his behavior was well-known.

"It wasn't occasional. It was all the time," says one Las Vegas gaming executive with personal knowledge.

But when new CEO Matt Maddox sat for an exclusive interview with CNBC on March 9, he insisted the company was intent on cooperating with the gaming board investigations and on listening to employees. When asked whether he was under pressure to stop any further damage to the Wynn brand, he answered, "The Wynn brand is not about one person. It's about 25,000 people that deliver the best luxury and the best service on the planet."

Maddox continued, "What I can tell you is the moves that we're making as a company: Getting rid of the noise, removing litigation, investing in our employees and meeting with the governments to make sure we're fully cooperating. I'm not concerned these lingering allegations are going to impact the $25 billion company and the 25,000 employees that work for it."

Jefferies Gaming Analyst David Katz expects Galaxy, T. Rowe Price and Capital Research Management to be influential to the company's future, with a combined 13 percent stake. Katz writes, "The removal of an overhang related to Steve Wynn's shares and the presence of a diplomatically connected entity in Macau should reduce the risk priced into the shares. Remaining is the question of the outstanding holdings of Elaine Wynn, which should fairly be considered a modest overhang."

Elaine Wynn becomes the largest shareholder in Wynn Resorts, with a 9.3 percent stake in the company — and now, she can vote those shares, something she was prohibited from doing under a deal with her ex-husband, which also prohibited her from selling her shares. Though Elaine Wynn is now also free to sell her stake, she's under no pressure to do so, unlike her ex-husband.

Instinet analyst Harry Curtis says he thinks it's more likely that Elaine Wynn would seek and get a seat on the board of directors. One advantage to her more active participation could be a persuasive reason for the company to retain the Wynn name, especially in Massachusetts where questions have been raised about whether a name change might be a condition for keeping the gaming license for Wynn Boston Harbor.

Additionally, Wynn Resorts is actively pursuing new board members to replace Ray Irani and Alvin Shoemaker, and it's especially focused on finding women directors. Maddox told CNBC, "We need diversity on the board, and we need business experience. … It will really provide a different perspective on our board."