Major Casino Stocks Decline
June 11th, 2010 | Published in Casino News
The gaming industry’s big three, MGM Mirage, Sands and Wynn, saw a decline in their stock prices during the month of May. The previous month, the three corporations witnessed a wild and unexpected upswing due to a recovering economy. Luckily, these declines didn’t hurt local casino operators that are under the corporate umbrella or gaming equipment manufacturers.
In April 2010, all three organizations saw double digit jumps in stock prices. May 2010 brought about daily average decreases in stock prices. Applied Analysis, which records the average stock price of six major casinos, believes this occurred for three reasons:
- Investor speculation of the large purchase of MGM Mirage’s stock
- Sands restarting construction in Macau
- The European financial crisis
The first reason is that investors speculated the purchase of a large portion of stock by a hedge fund. Paulson and Company, based out of New York, purchased 40 millions shares of MGM Mirage, making them the second largest shareholder of the company. This resulted in an increased pressure on pricing within the gaming industry.
The second reason is that the Las Vegas Sands restarted construction at the Cotai Strip in Macau. This project was halted for nearly 18 months. Finally the European financial crisis has significantly decreased travel to the United States and overall spending, especially in major casino resort areas. This has also resulted in flights being cut to Las Vegas from around the world.
Major casino area’s like Las Vegas and Atlantic City may take a much longer time to recover from the global financial crisis. The Aqueduct Racetrack in the New York City area may add table games. This would eliminate the need for area residents to go to Atlantic City. Also, casinos in Pennsylvania will also be offering table games as early as this summer. As a result, this will limit the need of residents to go to large casino areas.
On the other hand, many slot machine makers like International Game Technology, Bally Technologies and WMS Industries experienced a strong month of May with the average daily stocks improving by two percent overall.
Although casinos have taken a slight hit during the month of May, there is no doubt they will recover. Due to clever strategic moves by smaller competing casinos, the recovery process may be slower than desired. Major casino destinations have had their fair share of ups and downs, always coming out on top.