MGM Resorts CEO Bill Hornbuckle believes there’s been a bit of an overreaction on Wall Street regarding China seeking to better control its gaming industry in Macau.
The chief executive of the largest casino operator in Las Vegas tells Yahoo Finance that the recent sell-off of publicly traded gaming stocks conducting business in the Chinese Special Administrative Region (SAR) is perhaps a bit overdone. Last month, the six casino concessions collectively bled more than $18 billion in market capitalization during a single trading day.
Hornbuckle is of the understanding that China’s regulatory review of Macau’s six commercial casino operators will not fundamentally change the world’s richest gaming market.
Until proven wrong, I’m not and we’re not overreacting to what is being hyped or said,” Hornbuckle explained. “We are hoping rational minds control in the end because this is the Macau economy.”
MGM Resorts, along with its subsidiary MGM China, owns and operates two integrated resorts in Macau. MGM Macau, a 600-room resort with a 100,000-square-foot casino, opened in late 2007. MGM Cotai on the main Strip where Macau’s VIPs today play and stay opened in early 2018, with 1,390 guestrooms and a casino floor measuring 200,000 square feet.
Too Big to Fail?
The term “too big to fail” emerged during the 2007-08 global financial crisis. It’s a theory that certain corporations and financial institutions are so critical to an economy that their failures and insolvencies would be disastrous.
It’s a concept that can be applied to Macau. The SAR relies severely on its casinos to keep residents employed and generate tax revenue for the enclave government.
Hornbuckle says Macau recognizes the importance of its gaming industry, and “the value that we’ve brought as operators to the greater community.
“We do a lot in the community just beyond employment,” Hornbuckle stated.
More than 80 percent of the Macau government’s tax receipts are delivered by the region’s six casino companies. Macau’s government collected roughly $14.1 billion in taxes from gaming in pre-pandemic 2019. That number tumbled to just $3.73 billion last year.
Another reason for investor concern regarding the Macau six is the fact that their operating licenses expire in June of 2022. The regulatory review is in conjunction with the reissuing of the coveted permits.
Gaming analysts believe MGM Resorts, as well as Las Vegas Sands, Wynn Resorts, Galaxy Entertainment, Melco Resorts, and SJM Resorts, will receive fresh tenders next year. But they will likely come under new operating supervisory conditions. Hornbuckle isn’t overly concerned with the company gaining a new concession.
I think we’re all in good standing,” he declared.
As for now, Macau remains engulfed in a COVID-19 scare, as new cases have been detected. Today, the enclave confirmed yet another positive patient. As a result, the proposed easing of cross-border entry and exit protocols between Macau and neighboring Zhuhai have been postponed indefinitely.
The coronavirus situation pushed Macau casino stocks lower today. As of 1 pm ET, MGM shares were down one percent, Sands and Wynn down three percent, and Melco was the day’s biggest loser at a six percent reduction.
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