Wynn CEO believes Fertitta investment a smart buy

The top executive of Wynn Resorts Ltd. said he believes the large acquisition of company stock by Houston billionaire Tilman Fertitta is a wise investment decision as opposed to a prelude to take over the company.

Craig Billings, CEO of Las Vegas-based Wynn Resorts, shared his thoughts after he was asked Wednesday during the company’s third-quarter earnings call what he thought of Fertitta’s purchase of 6.9 million shares of Wynn stock, reported in a Securities and Exchange Commission filing last month.

Fertitta, sole owner and CEO of Fertitta Entertainment Inc., owns the Landry’s restaurant empire and other restaurant brands, the Golden Nugget Casino operations in multiple states, including downtown Las Vegas, and the Houston Rockets. He is a cousin of the Red Rock Resorts-owning Frank Fertitta family.

Based on the company’s closing stock price on the day of the transaction, the Fertitta investment was estimated at $385 million and made him, with 6.1 percent of shares, the second largest individual investor behind Elaine Wynn, who has 8.9 percent.

‘Kudos’

“Kudos to him because he’s done quite well since he appears to have started acquiring in the second quarter when the stock was excessively cheap,” Billings said. “It’s actually right around where we were buying back stock as well.”

A report on Fertitta’s purchase by Las Vegas gaming industry analyst John DeCree, published after the transaction, presented theories ranging from the move was just a passive investment to the possibility it was the first step toward a corporate takeover.

Billings thinks it’s the former.

“Based on what we’ve seen watching our share register as we do constantly, some time in Q2 we began seeing accumulations really by certain banks that have traditionally been associated with derivative transactions,” Billings 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 indicated Ferttita’s acquisition of Wynn stock as a casual investment transaction would be contrary to strategies he’s used in the past to take over companies. He cited initial investments in McCormick & Schmick’s and Morton’s Restaurant Group as examples of initial investments leading to corporate takeovers.

If it is a passive investment, Fertitta should be happy with trends reported in Wynn’s third-quarter results.

Losses narrowed

The company reported a net loss of $142.9 million, $1.27 a share, on revenue of $889.7 million for the quarter that ended Sept. 30. Losses narrowed from last year when the company reported a net loss of $166.2 million, $1.45 a share, on revenue of $994.6 million.

The 10.5 percent decline in revenue was attributed to Macao, where the company’s three resorts along with every other property there were closed for 12 days in July as a result of a COVID-19 outbreak.

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

The availability of acquiring visas online in China still hasn’t taken hold, he said. Wynn also is in line to be licensed another 10 years in Macao after submitting its application in September.

Meanwhile, the company’s Las Vegas and Boston properties showed revenue increases of $68.4 million and $19.6 million, respectively, over the previous year.

Wynn Las Vegas and Encore rode an 88.8 percent occupancy rate and average daily room rate of $426 to overcome unlucky casino play, in which table-game play win percentage of 20.7 percent was slightly less than it was a year ago and below the expected range of between 22 and 26 percent.

Billings attributed the high occupancy rate to entertainment programming in Las Vegas that has lifted all resorts, and the high room rate average to the quality of the Wynn product.

He said while group business was off in January and February due to the omicron variant outbreak and a relatively low turnout for CES, convention business came back and Wynn experienced strong business when the Specialty Equipment Market Association and Automotive Aftermarket Products Expo were in Las Vegas last week.

Billings believes the Las Vegas property will thrive as a result of the opening of its new “Awakening” show and in Boston, the legalization of sports wagering by the end of the year should add to its gaming numbers there.

He’s also enthused about progress in the United Arab Emirates where the company will initially operate the only casino in the emirate of Ras Al Khaimah. He said renderings of the planned property would likely be distributed by the end of the year with construction expected to begin in 2023.

Wynn shares, traded on the Nasdaq exchange, fell $2.14, 3.04 percent, to $68.28 a share in above-average volume. After hours, the stock rose 27 cents, 0.4 percent, to end at $68.55.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.