Analyst Clears Up Speculation on Fertitta’s Intentions With Wynn Stock

Tilman Fertitta’s growing stake in Wynn Resorts has sparked a flurry of speculation, with many questioning whether the Houston-based billionaire has his eyes set on a potential takeover. However, Wall Street analysts, including John DeCree, have moved swiftly to clarify that the increased investment is likely more of a strategic play than a precursor to a full acquisition.

Wynn Resorts stock surged 9% on Thursday, following news that Fertitta had boosted his holding in the company from 6.1% to 9.9%. The rally continued through Friday, with shares closing at $90.74, up from the mid-$80s the day before. This move solidified Fertitta’s position as Wynn’s largest shareholder, surpassing Elaine Wynn, the ex-wife of the company’s founder, Steve Wynn.

DeCree, a well-regarded analyst, issued a note to investors shortly after the news broke, attempting to dispel growing rumors that Fertitta’s intentions might be far more aggressive than they seem. Fertitta’s investment, he noted, was disclosed as a passive one in an SC 13G/A filing. Despite this, media outlets quickly latched onto the possibility of Fertitta pursuing an activism strategy or even attempting a hostile takeover.

Fertitta’s M&A History Fuels Speculation

Fertitta is no stranger to acquisitions, having previously expanded his empire through major deals, including the takeovers of Morton’s Restaurant Group and McCormick & Schmick’s. Both of these deals began with similar filings, which eventually led to full acquisitions. This track record fueled initial speculation that he might be eyeing Wynn Resorts for a similar deal.

Yet, DeCree pointed out that while Fertitta’s background in mergers and acquisitions (M&A) is undeniable, Wynn Resorts presents a far more complex and expensive target. The company’s significant international assets—namely its licenses in Macau and the UAE, where a new resort is under construction—would make any potential acquisition a far more complicated affair.

“We can appreciate the speculation,” DeCree wrote, “but Wynn would be a more difficult and costly endeavor, especially considering its global footprint.”

Wynn’s Performance: Stronger Than It Appears

Analysts have also noted that speculation regarding Fertitta’s dissatisfaction with Wynn’s stock price is somewhat unfounded. Although Wynn shares have had a modest dip of 1.5% over the past year, this is still a better performance than other gaming giants, including Las Vegas Sands (-1.9%) and MGM Resorts International (-6.8%). Moreover, Wynn shares have soared by nearly 70% since Fertitta first began purchasing stakes in the company back in 2022.

DeCree reiterated that, prior to Fertitta’s latest purchase, Wynn was already performing relatively well compared to its peers in the gaming sector. His recent move appears to be motivated more by an opportunity for long-term value, rather than dissatisfaction with the company’s current operations.

“Fertitta was able to acquire an additional 3.8% of Wynn’s stock at a very attractive price—less than eight times 2024 EBITDA,” DeCree explained. “This represents a bargain, particularly when compared to the multiples required for other standalone casino acquisitions.”

A Bargain Investment

Fertitta’s incremental stake in Wynn offers a compelling investment opportunity. The gaming sector has faced significant undervaluation in recent years, and Wynn’s iconic properties represent a strong, long-term bet on the luxury casino space. DeCree believes that Fertitta saw the chance to acquire some of the world’s most renowned assets for a price that offers solid upside.

Wynn’s undervaluation in the market, coupled with Fertitta’s potential to leverage the company’s resources, makes this a savvy investment move. However, DeCree expressed some caution about the likelihood of Fertitta making any significant strategic changes to Wynn in the short term.

“It’s hard to see any immediate strategic advantages Fertitta could bring to the table that would justify a major move,” DeCree wrote. “At this point, it seems more like a smart financial play with the potential to evolve into something more if the right situation arises.”

Strategic Moves and Speculation

Despite DeCree’s clear stance that Fertitta’s actions are currently driven by investment goals, some have suggested that Fertitta could eventually bring a more hands-on approach to Wynn’s operations. Ideas have been floated, ranging from merging Wynn with Fertitta’s Landry’s/Golden Nugget portfolio, to monetizing Wynn’s real estate holdings, or even exiting its Macau operations.

One notable angle is the potential expansion of Wynn’s brand in the U.S., an area that Fertitta has shown interest in before. While Fertitta has expressed dissatisfaction with Wynn’s communication strategy with investors, the possibility of a future push for growth in the U.S. remains a point of interest.

If Fertitta were to make a more aggressive move, analysts suggest it would likely require an outright bid for Wynn, given the fragmented shareholder base and the complexities of the company’s board structure. A proxy fight would be unlikely to succeed under these circumstances.