One could be forgiven for thinking that the age of the celebrity casino impresario in Las Vegas has passed. The industry has recently lost two such figures, thanks to Steve Wynn’s fall from grace and Sheldon Adelson’s passing.
However, it looks like Tilman Fertitta intends to take center stage on the Vegas Strip and the resort-casino industry more broadly.
According to a filing with the Securities and Exchange Commission (SEC), Fertitta owns 6.9 million shares of Wynn Resorts. He acquired the 6.1% stake through Hospitality Headquarters Inc., a subsidiary of Landry’s.
In the process, Fertitta has become Wynn Resorts’ second-largest individual shareholder. He’s behind only the founder’s ex-wife Elaine Wynn, whose stake is just under 9%.
The SEC requires filing by any individual who wishes to acquire a stake of 5% or more in any publicly-traded company. Additionally, the Nevada Gaming Control Board requires written notification for any such stake in a gaming corporation active in the state.
The filing does not specify the exact price Fertitta paid for his shares. However, share values have recently fluctuated from the mid-$50s to mid-$60s.
On Oct 28, the day before Fertitta’s stake became public, Wynn shares closed at $58.30. They gained 16.4% in the two trading sessions following the news. As of late Friday, Nov 4, the price was around $69, up over 18% from before the announcement.
Even so, the stock remains roughly 30% off its 52-week high of $99 in November 2021. It’s an even bigger drop compared to $143.88 in March 2021, the highest point it has reached since the events of 2020.
Big Moves by Fertitta
Interestingly, the Oct 19 filing date happens to be the same day on which Fertitta received approval to develop his latest property. That will be an upscale, 43-story, 2,420-room hotel-casino on the Strip. That new development will sit on the southeast corner of Las Vegas Boulevard and Harmon Avenue, across from the Cosmopolitan and Aria. It’s only about a mile and a half south of Wynn Resorts’ two Las Vegas properties, the Wynn Las Vegas and Encore.
The stake adds to Fertitta’s massive and growing collection of hospitality, entertainment and dining assets. Through Fertitta Entertainment Inc., Fertitta owns five Golden Nugget properties spanning Nevada, New Jersey, Mississippi and Louisiana. He also owns the NBA’s Houston Rockets and 60% of Landry’s Inc., which includes a considerable portfolio of restaurant brands.
The new Strip development isn’t his only ongoing casino project, either. He is simultaneously building a Golden Nugget-branded casino in Illinois, and is in the process of acquiring a casino in Cripple Creek, Colorado.
Can Macau Bounce Back?
In addition to strengthening his foothold on the Strip, the stake in Wynn offers Fertitta exposure to Macau. That’s a market that Fertitta does not have access to through his own holdings.
That’s perhaps a mixed blessing. The importance of Macau to Wynn Resorts might be better described as “reliance” than “exposure.”
In ordinary times, that’s a good thing, as Macau is the global hot spot for high rollers. In fiscal year 2019, before COVID-19, Wynn generated $1.82 billion of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) worldwide. $1.38 billion – or 76% – of that came from Macau.
These days, though, restrictions and lockdowns under China’s zero COVID policy have reduced visits to the Special Administrative Region to a trickle. That has short-circuited the gambling industry’s attempt at recovery there.
It’s impossible to gauge the timeline for a return to the robust pre-COVID days. The latest shutdown may be coming to a close, pending a second round of mass COVID tests over the weekend. However, the nature of COVID has been that “zero” never lasts very long.
Wynn’s US Retail Numbers Look Good
In the first six months of 2021, Wynn generated $265.8 million of adjusted EBITDA. The company’s properties in Las Vegas and Boston accounted for just under $240 million of that. The three Macau properties managed to produce $111.6 million, less than one-tenth of their pre-COVID contribution. Meanwhile, Wynn Interactive, a latecomer to the highly competitive US iGaming space, posted a loss of $83.4 million.
In 2022, Wynn’s adjusted EBITDA rose to $356.7 million for the same period. At the same time, the difference between the two markets became more extreme. On their own, its US properties produced over a half-billion. However, Wynn Interactive remained in the red, while Macau posted a loss of nearly $96 million.
The extent to which the US performance has rebounded is impressive. However, a fully-functional Macau is vital to Wynn’s well-being. Even with things as they are, Wynn Macau is bidding for a new casino license. With the investments it has already made, there will be no backing away from that market.
Fertitta and other shareholders won’t have to wait long for an update. Wynn’s Q3 results should be published next week.
Not Really the “Silent Partner” Type
For the moment, however, representatives from Wynn Resorts have done nothing beyond confirming that they’re aware of Fertitta’s stake. Fertitta himself has also not commented on the situation.
However, Fertitta’s track record may indicate that this is only the beginning of his interest in the company. His 2012 purchases of two of his prime restaurant assets, McCormick & Schmick’s and Morton’s Restaurant Group, both began with SEC filings. And, going back further, his battle to take Landry’s private dragged on for nearly two years, starting in 2008.
Fertitta’s business is also flush with cash at the moment. In May, he divested himself of his 60% stake in Golden Nugget Online Gaming through its sale to DraftKings. Aside from the direct proceeds of the deal, exiting the online space spares him the dilemma US iGaming CEOs are currently facing about how much to keep spending on marketing.
Still, with a nearly $8 billion valuation, Wynn would present a massive challenge for a takeover attempt. But Fertitta has not shied away from such challenges in the past.
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