MGM Resorts Terminates Share Buyback Plan

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MGM Resorts International reported on Thursday that it had “terminated” its offer to buy shares worth up to $1.25 billion. On Feb. 13, MGM launched a Dutch auction offer to shareholders to repurchase stock at a price ranging from $23.50 to $28. The bid on March 12 expired at midnight eastern time.

Jim Murren, former CEO of MGM Resorts, declared Thursday the cancellation of the buyback scheme, stating in a press release: “As a result of the unforeseen and unprecedented volatility in the financial markets due to coronavirus, and the resulting impact on our ability to determine and maintain an offering price range, we have decided to terminate the tender offer.”

Murren timed the announcement like any business executive should, when it would have the least effect on market results of the company. Instead of releasing the statement when trading was still active, which could potentially have triggered higher selling pressure, Murren issued the update shortly after the close of markets. The stock, however, was still down 15.6 percent from the trading of the previous day. It dropped another 10.22 percent in after-hours trading, putting the market at less than half what it was a month earlier.

MGM was originally prepared to pay between $29-$34 to buy the stocks when the price was about $31.80 on February 13. The stock started to drop the next day, and was down to $23.30 by March 4. That prompted MGM to re-update the deal based on the new price, but further declines–from Wednesday at $18.08–resulted in the programme being scrapped.

Murren remains confident about the future of the business. He recently stated: “At this time, we believe the Company has ample liquidity to weather the current uncertainties in the marketplace. More importantly, we do not expect the coronavirus to have a material impact on our business long-term.”

“Long-term” is relative to its use, but the short-term impact is going to be harsh. Operational interruptions, travel bans, self-imposed quarantines are all going to cause the U.S. gambling industry to take a hit, which MGM and others are already feeling. Murren adds, “Our domestic resorts have been impacted in the near term primarily driven by increased cancellations in our hotel and convention bookings in Las Vegas, particularly during the months of March and April.”

 

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