Activist company

Wynn CEO Billings praises Fertitta for buying company stock

Posted on: November 11, 2022, 04:31h.

Last update on: November 11, 2022, 04:47h.

Among recent eye-catching headlines from the gaming industry is the revelation that Tilman Fertitta’s Fertitta Entertainment now owns 6.1% of the outstanding shares of Wynn Resorts (NASDAQ: WYNN). Wynn CEO Craig Billings applauded his competitor’s decision.

Fertitta Wynn
Tilman Fertitta at a press conference in 2019. Wynn CEO Craig Billings applauded him for being a shareholder in the company. (Image: ESPN)

A Schedule 13G filing with the Securities and Exchange Commission (SEC) indicates that Fertitta Entertainment, Fertitta itself and another entity purchased 6.91 million shares of Wynn in October. Coincidentally, some of Fertitta’s purchases occurred as the casino operator purchased its own shares. Operator Encore repurchased $29 million of its own shares in the third quarter, bringing its year-to-date buyback total to $166.4 million.

Well, I guess what I can say is kudos to him (Fertitta) because he did pretty well. Billings said on the company’s third-quarter earnings conference call. “Since it seems to have started to acquire in the second quarter when the stock was excessively cheap. It’s actually just when we were also buying back shares that we reported during our second quarter Q (10Q).

Wynn’s chief executive added that the company was monitoring trades indicating an accumulation of stock during the second quarter. With the help of an 8.31% rally today, Wynn stock is up 22.64% over the past month, indicating that Fertitta is almost certainly in the green on its investment.

Value bet, but Fertitta may have other plans

Like other gaming stocks, especially those exposed to Macau, Wynn has suffered its share of headwinds this year. But some market watchers think some of these names are inexpensive. Billings seems to agree that this could be a reason Fertitta embraced the stock.

“Overall, I think it’s just a great recognition of the value of our equity. But there’s not much more to say beyond that,” he said on the call.

However, some analysts are speculating that the Golden Nugget owner’s move to Wynn stock could be a precursor to something more substantial, including a possible takeover bid. The aforementioned 13G filing indicates a passive stake. But analysts noted that Fertitta used to turn 13G into 13D – the SEC document required of activist investors.

So far, the Houston Rockets owner hasn’t commented on plans for his investment in Wynn, and the company hasn’t said it’s in takeover talks, or even that it’s for sale. Billings did not say on the call whether or not he spoke to Fertitta about the investment.

Acquiring Wynn wouldn’t be easy

While it’s not immediately clear what Fertitta’s plans are for his investment in Wynn, he is now the second largest individual investor behind only Elaine Wynn.

If the billionaire decides to pursue a takeover of Wynn, it won’t be easy. It would likely have to tap into the capital markets to cover a significant portion of the purchase price, and Fertitta Entertainment would likely have to take on risky debt. In this environment, some banks may not want to extend large amounts of lower quality corporate bonds, particularly in the cyclical gambling industry.

An analyst said the Strip land on which Fertitta is building a new gambling site could be used as a chip in a potential Wynn takeover. But it remains to be seen if he will continue on this path.