Ahead of the Bell: Wynn Resorts drops on lawsuit
Jan 12, 2012, 8:02 PM
NEW YORK (AP) – Shares of Wynn Resorts Ltd. declined before the market open on Thursday after its vice chairman filed a lawsuit against the casino operator that an analyst said could scare off investors.
Wynn Resorts shares fell $5.39, or 4.8 percent, to $106.50 in premarket trading.
The lawsuit, which seeks financial records related to Vice Chairman Kazuo Okada’s investments in the company, was filed in a Nevada court on Jan. 11, the company said in a regulatory filing. Okada is also the founder of Wynn Resorts’ biggest shareholder, Universal Entertainment Corp., with a nearly 20 percent stake in the company.
The high-profile lawsuit will hurt the stock, said Sterne Agee analyst David Bain in a client note.
Okada alleges that even though he has made several written requests for the records he wants to see, Wynn Resorts has refused to give him access. He said that on Nov. 2, he had sought documents regarding Wynn Resorts’ approximately $135 million donation to the University of Macau; its 2010 amendment to a shareholders agreement among Okada, company founder Stephen Wynn and Wynn’s ex-wife, Elaine Wynn; and the use of $30 million that Okada gave to Wynn Resorts in 2002 to help develop a Macau casino project.
Okada lists $380 million that he had invested in Wynn Resorts since 2000.
Wynn officials issued a statement calling the lawsuit “preposterous and without merit,” and saying they would defend the company vigorously.
The analyst said that investors may pull their money out of Wynn Resorts because of the lawsuit and instead invest in rivals like Melco Crown Entertainment Ltd. or MGM Resorts International, which also operate Macau casinos.
Macau is the only place in China where gambling is legal. Its fast growth has made companies with Macau properties more appealing to investors than casino operators that are only in the United States. U.S. casinos have not fared as well in the weak economy.
MGM Resorts shares edged up 3 cents to $11.99 in premarket trading, while Melco stock gained 16 cents to $10.54.
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