There is no question, regardless if you like or dislike Steve Wynn or Elaine Wynn, that they have been good for Las Vegas. Whether it is in job creation, community activism or any number of their other positive efforts, they have certainly touched a lot of lives, in this writer’s opinion, for the better.
In this light, it is sad to see the ongoing issues play out in the public eye, somewhat dimming the light of their good activities. However, as it is in the public eye, some of the bantered topics beg question.
First off, love the proposed plan Mr. Wynn announced for the creation of Wynn Paradise Park. It makes total sense and seems well poised to embrace the millennial generation’s desires for personal interactive involvement in their entertainment experiences. The notions of a hotel overlooking a lake in which various activities ranging from water skiing to fireworks are available are right there.
Yet, in the investor presentation Mr. Wynn noted the plan still needs the approval of the Wynn Board of Directors. Some might consider it presumptive that the CEO of a public company would announce a project prior to receiving his board’s approval, after all imagine the embarrassment if the board canceled the project.
Mrs. Wynn, on the other hand, might use the announcement as a supportive example of some of her assertions regarding Mr. Wynn’s control of the company and its board. While I hope the Wynn Board approves the project and it becomes a reality, perhaps the more prudent thing for Mr. Wynn to have done would have been to hold off its announcement till after approval.
Last year when the subject of control over Mrs. Wynn’s stock became so topical amid the fight for retention of her board seat, much was made of both the company’s loan covenants that require the Wynn’s to hold their stock and the importance of Mr. Wynn being able to vote the stock.
This year the loan covenants have not been raised, but arguments have been raised that Mr. Wynn needs to retain the voting rights to retain control of the company and provide confidence to the employees for their job security and fidelity. This begs some question in logic; the combined Wynn holdings are roughly 21 percent of the outstanding shares, to have control of the company one would need 50 percent plus one share of the voting stock.
Further, last year we learned Mrs. Wynn had hired a number of the employees, so if that concern to project stability and job security was so important why was Mrs. Wynn not retained on the board? As there is frequent turnover in line employees, is the real concern over key executives, which are probably already or should be under employment contracts?
It was reported Mr. Wynn had offered to buy Mrs. Wynn’s shares. On the surface we could think that is a good way to resolve the issue. Sadly though, if Mrs. Wynn sold her shares she would take a huge tax hit and lose out on share appreciation and dividends.
In the world of huge wealth, such shares are often pledged as collateral in other deals designed to grow wealth, such that $1 billion in stock can be leveraged and re-leveraged to work like $2 or $3 billion. Thus there would be no sense in her selling $1 billion to net between $700 and $800 million when, if she got free control of her shares, she could have it work and grow to between $2 and $3 billion or more.
Mrs. Wynn must be careful though. Some of her suggested accusations about activities at the company, pending the time she learned of them, could create liabilities. If she knew of improprieties or management misconduct while a board member and failed to report it to the board or, pending severity of events, potentially to the Nevada Gaming Commission or the SEC, she could find herself in hot water if they are found to be true and of material consequence.
Perhaps the wise thing is to tear up their contentious voting rights agreement. After all, if the loan covenant is still in place Mrs. Wynn’s shares can’t be sold, and even if Mr. Wynn’s personal voting power is diminished he is so personally integrated into the image and brand of the company he will likely remain CEO as long as he capable. So why fight.
The Analyst is an experienced gaming industry executive who offers insight each week on events and issues affecting the industry. Contact The Analyst at [email protected]