MGM Resorts Sees Director’s Hedge Fund Corvex Management Bump Up Shares

Posted on: June 11, 2019, 01:55h. 

Last updated on: June 11, 2019, 02:00h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

MGM Resorts International Director Keith Meister’s Corvex Management recently added to its stake in the gaming operator that owns the Bellagio and 13 other Las Vegas Strip casinos and hotels.

MGM Resorts Director Keith Meister is bullish on the gaming operator’s stock and recently significantly upped his hedge fund’s shares. (Image: Adam Jeffery/CNBC)

Corvex Management, a New York-based activist hedge fund, paid $75.2 million to purchase another 2.87 million shares of MGM from June 5 through June 7, bringing the firm’s total investment in the casino operator to 18.56 million shares, or 3.5 percent of the company’s shares outstanding.

According to a Form 4 filing with the Securities and Exchange Commission (SEC), Corvex bought more than 1.13 million MGM shares on June 5. The next day, the hedge fund added nearly 954,000 shares in the Mirage owner before purchasing almost 782,000 MGM shares on June 7.

Corvex was buying into strength, paying $25.82 for MGM stock on June 5 and then higher prices of almost $26.38 the next day and $26.44 on June 7, according to data from the SEC.

Interesting Timing

Corvex boosted its position in MGM — which operates more Las Vegas gaming properties than any other company — via a Rule 10b5-1 trading plan. That plan executes trades when certain criteria, including price and volume stipulations, are met, according to Barron’s.

The hedge fund’s new purchases of MGM stock came just days after the company announced a second round of layoffs, bringing its reduced headcount to 1,033 positions. As part of its 2020 plan announced in January, Las Vegas-based MGM has been looking for ways to boost annual adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by $200 million over the next two years, while cutting costs by $100 million this year and another $100 million by the end of 2021.

Recently, Brian Sandoval, the ex-Nevada governor and former judge and state attorney general who is now president of global gaming development at MGM, said the company’s efforts to rein in costs could be advantageous as it seeks to land one of Japan’s coveted gaming licenses.

Media accounts emerged on June 7, reporting Sandoval’s comments. On that day, Corvex was a buyer of MGM shares, indicating conditions of its Rule 10b5-1 trading plan could have been or were previously triggered.

Some gaming industry analysts are speculating that financially sturdy companies will be preferred by Japanese regulators when it comes to awarding licenses in the world’s third-largest economy.

Directors Like MGM Stock

News of Corvex’s increased stake in MGM comes about a month after it was revealed that another director, Paul Salem, purchased 800,000 shares of the company’s stock worth $20.3 million at the time. Meister and Salem are two of the independent directors on MGM’s real estate committee.

MGM appointed Meister to its board in January, expanding its number of directors by one, up to 13 from 12. At the time, the hedge fund manager said, “I expect to be a long-term investor in MGM.”

Meister has previously served on boards of several well-known public companies, including Yum! Brands, Inc., which owns KFC and Taco Bell, and has casino director experience via a previous board slot with American Casino & Entertainment Properties.

Corvex manages $11 billion in assets and MGM is its largest stock holding at 28.18 percent of the firm’s equity portfolio.