Steve and Elaine Wynn have taken a big step toward selling their stakes in Wynn Resorts (NASDAQ: WYNN), the gaming company they founded nearly two decades ago. Up until recently, any potential sale of either one's shares would have been held up by an agreement among the two divorced ex-spouses with their fellow original investor Kazuo Okada -- a pact that kept each of them from selling shares without permission from the other, and mandated that they to vote in unison, effectively giving Steve Wynn full control of the company.
But Okada was forced out of the company in 2012, and with Steve Wynn recently stepping down from his roles as chairman and CEO, the parties have come to an agreement to end the restrictions they were under. This will free either of the Wynns to sell their respective stakes in Wynn Resorts, which adds up to 21% of the company. If they do, it could alter the casino giant's direction forever.
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Elaine and Steve Wynn's potentially massive sale
Elaine Wynn has been trying to break free of this agreement for years, while Steve Wynn has been trying to tighten his control of the company. His strategy, though, took an about-face when he resigned. A filing last week said that Steve Wynn will be free to sell shares, and may indicate he plans to do so quickly:
Mr. Wynn may seek to sell all or a portion of the Common Stock controlled by him pursuant to one or more registered public offerings, in the open market in transactions pursuant to Rule 144 under the Securities Act of 1933 or in privately negotiated transactions. If he elects to sell any such Common Stock, he will seek to conduct such sales in an orderly fashion and in cooperation with the Company.
Along with this filing, Wynn Resorts offered to pay $25 million to the holders of $500 million in 4.25% Senior Notes due 2023 if they agreed to a change in the "Change of Control" provisions of their debt. This would open the way for Steve Wynn to sell shares, effectively relinquishing control of the company.
Easing regulators' concerns
We don't know exactly what is driving Steve Wynn's rush to secure the right to sell his shares, but it may have something to do with Wynn Resorts' valuable gaming licenses, particularly in Massachusetts. The gaming company came under tremendous pressure there after the sexual misconduct allegations become public, and the state could pull the gaming license for the massive casino it is building just outside Boston if it determines Steve Wynn's association with the company -- and its response to his alleged behaviors -- renders it "not suitable."
So in his capacity as a key shareholder, Steve Wynn may be trying to alleviate any risk he still poses to the company's biggest pending project; he may be willing to cut his financial ties to it, as long as his namesake business lives on and prospers.
Public comments from legislators and competitors are one thing, but we don't really know how regulators view the allegations of sexual misconduct against Steve Wynn, nor their opinion of the company that allegedly failed to exercise appropriate oversight of his actions.
Wynn Resorts will live on
With the exit of Steve Wynn, Wynn Resorts will lose the visionary founder who built it into what it is today. But with three megaresorts already in operation and another under construction, it's unlikely that there will be any major changes to the company's day-to-day operations. One area where there could be a shift during the next few years is in regards to the company's aggressive plans to push into Japan. That nation may open up bids for its first gaming licenses later this year. Steve Wynn had made acquiring one a top priority, but that plan may now be reassessed, especially if new management chooses to focus on current operations rather than on expansion.
Wynn Resorts is a well-run company, and even without Steve Wynn at the helm, its executives have decades of experience in the industry. Customers will keep coming to its resorts to get the luxury experience it delivers, and that's what really matters for investors. So even if Steve and Elaine Wynn sell their shares, this in my view is a stock worth owning long term.
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