Wynn Macau Pouring $596M into Business to Comply with Gaming Law

Wynn Macau has announced it is allocating $596.4 million to its Wynn Resorts Macau (WRM) unit. The move is to comply with the capital requirements laid out in the special administrative region’s (SAR) new gaming laws.

Macau’s updated gaming policies require concessionaires to hold a certain amount of cash on hand. They must also have a Macau-based managing director hold at least 15% of the voting shares in the entity holding the gaming license. To comply with the latter requirement, Wynn Macau boosted the voting shares held by Linda Chen to 15% from 10%, according to a regulatory filing. Chen currently serves as chief operating officer, executive director, and vice chairman.

Subject to approval by the Macau government, WRM will amend its articles of association such that (i) all Class A nominative shares of WRM shall be held by the managing director of WRM, who is a permanent resident of Macau; and (ii) in the event of any termination of service or replacement of the managing director of WRM, all Class A nominative shares of WRM shall be transferred to the new managing director,” according to the regulatory document issued by Wynn Macau.

As part of the capital restructuring, Chen receives nearly 730,000 Class A shares in the gaming company, while 2.44 million Class B shares are subscribed to Wynn Resorts Macau. Another 1.62 million Class C nominative shares will flow to the US-based parent of Wynn Macau.

“Given the Class A nominative shares held by Ms. Linda Chen have restricted rights and only entitle [her] to the nominal amount of dividend payable, the company will be effectively entitled to a 100% economic interest in Wynn Resorts (Macau),” added Wynn Macau.

News of Wynn Macau’s capital restructuring emerged a day after the company, along with the other five concessionaires, was granted a new, provisional gaming license.

“Wynn Resorts is pleased to announce that Wynn Resorts Macau received a provisional award of a gaming concession from the Macau government. The ultimate award of the gaming concession contract remains subject to the final documentation of its exact terms and conditions with the Macau government,” according to a statement issued by the Las Vegas-based gaming company.

Some analysts say that with the Macau renewal in the rearview mirror, a substantial overhang is and rival operators. Others see multiple catalysts potentially propelling Wynn shares to the upside.

For example, JPMorgan analyst Joseph Greff wrote in a note to clients on Monday that Wynn stock should benefit from China relaxing COVID-19 travel restrictions. The analyst also noted the investment community’s expectations for the operator’s performances on the Las Vegas Strip and at Encore Boston Harbor are “subdued, creating a low bar.”

He said that, based on 2024 estimates, the stock is attractively valued. Greff upgraded Wynn to “outperform” from “neutral” while lifting his price target on the stock to $91 from $71. That implies significant upside from Monday’s close at $78.20.

Like other US-based concessionaires, Wynn has previously provided financial support to its Macau business. In June, the Macau entity $500 million.

As for the newly revealed capital restructuring, it won’t have a material impact on Wynn Macau.

“Since the company will be effectively entitled to a 100% economic interest in WRM, the reduction of voting rights in Wynn Resorts (Macau) held by the Company from 90% to 85% has no material financial impact on the Group,” according to the filing.