Shares of MGM Resorts (MGM) are on the rise on Monday after IAC (IAC) announced its accumulation of a 12% interest in the company for an aggregate of about $1B, saying it was initially attracted to "an area that currently comprises a tiny portion of its revenue - online gaming." Meanwhile, MGM Resorts said it "welcomed" IAC as a "significant investor." Commenting on the news, JPMorgan analyst Joseph Greff said he sees the announcement as an "unexpected development" that validates MGM's opportunity in the emerging U.S. sports betting and iGaming markets.
IAC ACQUIRES INTEREST IN MGM: IAC has announced its accumulation of a 12% interest in MGM Resorts for an aggregate of approximately $1B. "With the separation of Match Group [MTCH] from IAC, and 'new' IAC emerging with $3.9B of cash, no debt, and its opportunistic zeal intact, we are energized and excited to make this investment in MGM. What initially attracted us to MGM, besides its leadership in leisure, hospitality and gaming, was an area that currently comprises a tiny portion of its revenue - online gaming," said Barry Diller, Chairman and Senior Executive of IAC. "IAC's foundational concept of seeking opportunities to build interactive businesses is our base rationale - there is a digital first opportunity within MGM Resorts' already impressive offline businesses, and with our experience we hope we can strongly contribute to the growth of online gaming."
"MGM Resorts presents a unique opportunity for IAC to own a meaningful piece of a preeminent brand in a large category with immense potential to move online," said Joey Levin, CEO of IAC. "We will be a minority investor and a long-term strategic partner, and would welcome the opportunity to contribute to MGM's success in any way that MGM's Board would look favorably on our involvement.
MGM 'WELCOMES' IAC: In a statement, MGM Resorts said that the company "welcomed the announcement that IAC/InterActiveCorp, the media and technology company founded and led by renowned business leader Barry Diller, has made a significant investment in MGM Resorts International." "We could not be more excited to welcome IAC and Mr. Diller as an investor in MGM Resorts. Mr. Diller and Joey Levin, CEO of IAC, bring vast experience in both entertainment and online commerce and we will take full advantage of their experience," said Paul Salem, MGM Resorts Chairman of the Board of Directors.
"IAC's family of brands and digital expertise are a great complement to the direction MGM Resorts has been taking both in leveraging our digital assets to enhance our guests' experience and building a leading iGaming and sports betting business in BetMGM. We welcome IAC as a long-term strategic partner and intend to invite them to join our Board of Directors. Data-driven, digital and customer-centric innovations are a key principle of the MGM 2020 plan announced last year and MGM Resorts' executive leadership is excited that IAC recognizes the tremendous value creation potential." "IAC's expertise in growing and expanding brands online is a natural fit for our focus on enhancing the resort experience through curated and personalized offerings, as well as digital enhancements in sports betting and online gaming," said CEO and President Bill Hornbuckle.
SPORTS BETTING, ONLINE GAMBLING OPPORTUNITY: In a research note to investors on Monday, JPMorgan analyst Joseph Greff said he interprets the announcement that IAC took a 12% stake in MGM Resorts for $1B as an "unexpected development," but one that "makes sense." The news validates MGM's opportunity in the emerging U.S. sports betting and iGaming markets, as well as that of the entire land-based gaming industry, Greff contended. Given the new outside-the-gaming industry interest in partnering with these casino operators from the online and media companies, the analyst would expect other land-based casino operators with stated online gaming strategies to benefit from "elevated valuation floors." Greff also thinks Monday’s news should shift investors' focus away from MGM's slow near-term recovery in Las Vegas to its accelerating longer-term strategic opportunities. The analyst has a Neutral rating on MGM shares.
WHAT'S NOTABLE: College sports might be in jeopardy this coming fall, which would be bad news for online gambling and sports betting. Commissioners of the Power 5 conferences held an emergency meeting on Sunday, as there is growing concern among college athletics officials that the upcoming football season and other fall sports can’t be played because of the coronavirus pandemic, according to ESPN, citing sources.
Several sources have indicated to ESPN that Big Ten presidents, following a meeting on Saturday, are ready to pull the plug on its fall sports season, and they wanted to gauge if commissioners and university presidents and chancellors from the other Power 5 conferences -- the ACC, Big 12, Pac-12 and SEC -- will fall in line with them, the report noted. Furthermore, sources told ESPN that a vast majority of Big Ten presidents have indicated that they would vote to postpone football season, hopefully to the spring.
Citing several sources have also told ESPN over the past 48 hours that the postponement or cancellation of the football season seems inevitable. Many of those sources believed it ultimately will take a Power 5 conference to move things in that direction and that either the Big Ten or Pac-12 would probably be the first league to do it, the publication added.
PRICE ACTION: In afternoon trading, shares of MGM Resorts have gained almost 14% to $21.61. On the flip side, DraftKings' (DKNG) stock has dropped over 9% to $30.93, while Penn National Gaming (PENN) has slid more than 4% to $46.93.
Penn Entertainment
-2.01 (-4.10%)
DraftKings
-3.01 (-8.84%)
Match Group
-1.14 (-0.99%)
IAC
-1.96 (-1.47%)
MGM Resorts
+2.66 (+13.99%)