Thursday, February 8, 2018

Play to Wynn the Game of Casino Regulation

By Maria Boroaroma
Financial Columnist

What with all the healthy correcting going in the stock market (and everyone I know on Wall Street who makes a living selling stocks says it's a great buying opportunity!), you might have missed the slight hiccup in the fortunes of the Wynn Corporation, until yesterday helmed by Nora Ephron's BFF, Steve “the Ladies' Man” Wynn.

Mr. Wynn, whom I hear is one of the most charismatic and brilliant executives the world has ever known (according to his investor relations department), decided to step down as President and CEO of the Wynn Corporation, which owns and runs casinos in legendary gaming meccas like Las Vegas, Macau, and soon Everett, Massachusetts.

His decision follows revelations of what he termed “ridiculous” claims that he had sexually harassed multiple waitresses, masseuses, housekeepers and other no fun types who labor in his empire, claims that at least on one occasion he settled for a mere $7,500,000 out of his own pocket.

I mean, who among us hasn't had to settle ridiculous meritless litigation for $7.5 million?  It could happen to anyone!

Steve Wynn, shown here with his yoga instructor,
forcefully denies mistreating his employees
Insiders I spoke to privately said that Mr. Wynn's decision to step down at the youthful age of 78 was intended to avoid any problems with pesky casino regulators, especially those in Massachusetts, which, unlike Nevada, is not a wholly-owned subsidiary of the gambling industry.  Sources close to Mr. Wynn (but not too close I hope if you catch my drift!) say that his resignation should put to rest any concerns regulators may have about his influence over the casino now rising from the Everett wasteland.

And why shouldn't it?  After all, it's not as if he has any remaining influence over the corporation that bears his name.  According to Wynn's proxy materials, Steve Wynn owns a mere 11.8% of Wynn stock.  That's hardly enough to worry about, even though numerous different securities laws define an “affiliate” as someone who owns at least 10% of the voting securities of the company deemed to be under his control.

In case you might be worried that Wynn, even in retirement, might be able to exert significant influence over all matters requiring shareholder approval, the Company's annual report on Form 10-K should set your mind at ease:
As of December 31, 2016, Mr. Wynn and Elaine P. Wynn owned 12,000,000 shares and 9,611,927 shares, respectively, or in the aggregate approximately 21.2%, of our outstanding common stock. As a result, Mr. Wynn and Elaine P. Wynn, to the extent they vote their shares in a similar manner, may be able to exert significant influence over all matters requiring our stockholders' approval, including the approval of significant corporate transactions.

(It may be fair to note that recent events have perhaps lowered the chances that the former Mr. and Mrs. will see eye-to-eye on matters related to corporate governance, or anything else.)

And if the Massachusetts casino regulators have little to worry about, Wynn investors have even less.  It's not as if the company's stockholders depend on the Ladies' Man for creating significant long-term value.   As its proxy says:
Mr. Wynn is the founder, creator and name behind our brand. We believe that he brings extraordinary talent to our Company that is unrivaled in our industry. The Compensation Committee believes that Mr. Wynn’s contributions to our longstanding, consistent achievement over the last decade have been, and continue to be, instrumental in creating significant long-term value for our stockholders. These factors were key in the determination of Mr. Wynn’s compensation during fiscal 2016.
And that's why he trousered a mere $28,156,985 in 2016.

The good news for Wynn investors is that the company should be able to find equally lucrative ways to spend $28 mil in 2018.  My sources tell me that notwithstanding the reputation the Commonwealth enjoys for probity and honesty in all matters relating to its governance, you can buy or at least rent a goodly number of Massachusetts legislators for that kind of jack.  Those sources say that if you don't believe them, they've got a collapsed parking garage at UMass Boston to sell you, for a lot less than $28,156,985.

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