Wynn Resorts (WYNN)

On February 4, 2009, US President Barack Obama announced limits on executive compensation and luxury expenditures for companies receiving TARP funding.^[1] Because these new rules bring corporate spending on conferences and parties under close scrutiny, Wynn will see even less business as the economy worsens. For example, Wells Fargo canceled a Las Vegas event hosted at the Wynn Las Vegas and the Ecnore Las Vegas a day before Obama's announcement was made.^[2] With the newly-increased scrutiny over these types of expenditures, even more corporations cut back on event spending in February 2009, leaving the entire industry with a 20% RevPAR decline in a single week.^[3] The crusade on "corporate excess" will mean bad news for WYNN.

I like betting against the house...

On March 16, 2009, WYNN announced that it plans to sell 7 million new shares of common stock for essentially unspecified reasons.^[1] Analyst Steven Kent from Goldman Sachs sees little chance that the company will use the new capital to make acquisitions because it has never acquired a previously owned property since its foundation.^[1] The most likely reason that WYNN decided to raise capital through this offering is to pay off debt - a sign that the company is not in a good situation.

When new WYNN common stock shares were last offered in November 2008, the company's share price promptly slid 40%.^[2] The same move was also tried in October 2007 and caused WYNN's share price to reach a ceiling.^[2] Will this time be any different? Nothing suggests that it won't.

A change in Macau's gaming laws, overbuilding in Macau, and low demand for long term visits could lead to lower revenues for the Wynn Macau. Furthermore, gaming industry revenues in Macau dropped 30% in January 2009 from January 2008;^[1] such a sharp drop after years of consistent growth in the market suggests that Macau gaming may just be a big bubble.