Steve Wynn (WYNN) – A Flipp’n Genius
November 10, 2009 1:13 pm
Ahhhh. They say that, “it takes money to make money.” And, Steve Wynn knows that all too well. He is a genius extraordinaire that has gobs of money and just made more. This last play even helped him save a ton of taxes to boot…
Remember over the last 2 weeks when Wynn Resorts (WYNN) shares were on a roller-coaster? The company had a successful IPO of the Wynn Macau property to the tune of $1.3billion and then refinanced about $500 million of debt. Then came the awful earnings report that took the stock down hard. (Client accounts were short into the earnings and covered for a nice profit)
On the heels of that we hear that the company pulls out of the Aqueduct Racino project.
But the best was today’s news that has to makes you really squint, nod and say; nice job Steve!
Let’s look at why Mr. Wynn is laughing all the way to the bank:
- First, let us recall that Mr. Wynn is of the belief that this administration is spending far too much in a reckless manner and that taxes are sure to go up, so….,
- Wynn IPOs the Macau property as they know this is an overheated market and any hook will be bitten by investors
- From that IPO, $1.3 billion is the final take on that gamble and is going to be used for general purposes (help with the ailing Vegas properties we are told),
- Investors get the idea that Wynn now has the cash to survive the las Vegas disaster for a considerable time, even if things do not improve for a while,
- Issue a whopping special dividend of $4 per share and initiate a regular quarterly dividend,
- Any WYNN buyback plan may be initiated and perhaps insiders and others buy up to push the share price,
- As a result, short positions cover as they know that they will be liable for the large dividend payment – starting a short-cover squeeze in the shares (1.83 short interest as of latest report)
- When the dividend is paid, the stock will see a resulting drop of $4 – selling after this could provide a short-term capital loss at ordinary income rate rate for anyone who recently bought shares into the dividend.
- Steve Wynn, personally holding 46,702,639 shares will receive a payout of $186,810,556. (From 8/13/09 13D filing – pdf)
- The payout of the special dividend will be taxed at the lowest rate, now at 15% – saving him 5% over the long-term capital gains rate if he were to sell his shares,
- The end result is that Mr. Wynn essentially sold his part of the company at a premium through the IPO process and pays only 15% tax on the proceeds,
- Finally, he artfully avoids the publicity that usually surrounds the news that the CEO is selling $88,613,668 of shares – usually a no-confidence vote that concerns investors.
A good deal? You do the math…. Well Steve, well done indeed!
Next up: Sheldon Adelson, Las Vegas Sands (LVS) a $3billion+ IPO coming to China within weeks.
Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.