Wynn Resorts reported a $276.6 million loss for its Interactive Division in 2023, roughly one-third of which comes from a drop in the assessed value of the division itself. The company’s Q4 and year-end 2023 results show a $94.5 million write-off for “goodwill impairment and intangible assets.”
In finance speak, “goodwill and intangible assets” equates to what the company thinks the division is worth, minus the value of all its physical property, contracts, and anything else you could put an exact price tag on. Goodwill and intangibles include things like:
- Positive consumer sentiment
- Good standing with regulators
- Recognizable brand
- Market insight
They can also include anything else that would help the company make more money in the future than someone else could with the same setup.
Per SBC Americas, company representatives avoided any mention of interactive operations on this week’s earnings call.
The 2023 drop in intangible value is nearly twice what Wynn deducted the year before. In its 2022 annual report, it reported $37.8 million in goodwill impairment. Adding in a $10.3 million loss in “other finite-lived intangible assets” gives a total of $48.1 million.
Hesitation May Have Sunk WynnBet’s Chances
There may not be much more intangible value left in the WynnBet brand. Wynn Interactive has been dialing back its operations since August 2023. It dropped out of most markets, keeping only a few states where it felt it could perform well.
Worrisomely, it has just announced it will also leave Massachusetts, one of only two in which it had “firm plans” to continue operating. That leaves Nevada for sports betting and Michigan, where its online casino operations remain “under review.”
WynnBet may represent the biggest swing-and-a-miss at the online market by a US retail casino operator. MGM Resorts struck it big through its joint venture with Entain to produce BetMGM, which is still in contention for the top spot in iGaming. Caesars and Rush Street (BetRivers) have likewise done well, placing among the top five operators in most states.
Penn Entertainment has burned through an alarming amount of money on its various partnerships and acquisitions but has something to show for it all. And then there were some casino companies that mostly avoided the space, like Las Vegas Sands.
Wynn’s woes likely stemmed from trying to do too much, too late. Its eponymous founder, Steve Wynn, was in the same camp as the late Sheldon Adelson—firmly against legal online gambling in the US. It was only after his ouster that the company scrambled to try to capitalize on the new opportunity. By then, BetMGM, DraftKings, and FanDuel had an iron grip on the market. Even among second-tier operators, competition was fierce, including the likes of Golden Nugget, BetRivers, and Caesars.
The SPAC Disaster That Didn’t Happen
The collapse of WynnBet’s value is interesting in that it could have been far worse for investors than it has been. The company’s retail properties continue to perform well. That seems to have offset any disappointment in Wynn Interactive, with Wynn shares (Wynn Resorts 104,16 +1,70%) still hovering around the same $100 mark where they began 2021, as WynnBet was launching.
Things presumably would have been quite different if Wynn had been successful in its plan to spin off the Interactive division. WynnBet launched just at the tail end of the investment feeding frenzy that accompanied the start of legal sports betting in the US. Taking online operations public by way of a special purpose acquisitions company (SPAC) was all the rage.
The rise, fall, and eventual rebound of DraftKings stock (DraftKings 41,28 +1,08%) is the highest-profile example. Starting from a value of around $10, its shares shot up to over $70 in less than a year before tumbling almost all the way back down just as quickly. Investor lawsuits ensued, although the company successfully defended itself against them.
That roller-coaster happened even though DraftKings leads the US market. Its share value crash resulted from investor frustration as high promotional spending delayed the company’s journey to profitability.
Had Wynn Interactive successfully gone public at the company’s estimated valuation of $3.5 billion—and had its subsequent performance gone as it has in reality—the meltdown might have made DraftKings’ volatility pale in comparison.
What is Wynn Interactive Worth Now?
By the company’s own assessment, WynnBet was worth only $500 million by January 2022. However, it failed to find a buyer at that price, either.
The company hasn’t said what it thinks the division is worth now. However, we can hazard a guess based on its financial statements. In its 2021 annual report, it showed $288 million in tangible assets at the end of the year. The $500 million price tag it put on the division at the start of 2022 suggests it estimated $212 million in intangible value.
Deducting the $48.1 million write-off in 2022 and $94.5 million in 2023 implies a remaining intangible value of $65.4 million.
We’ll have to wait for the 2023 annual report to see what its tangible assets are worth. However, last year’s shows $214 million at the end of 2022. Even if we assume no change in 2023, we end up with a hypothetical company worth just 8% of what investors narrowly avoided paying for it three years ago.
Disclaimer: The above calculations are for informational purposes only and do not constitute financial advice.