Sell Half of Wynn Resorts (WYNN), Hold the Rest
Wynn Resorts (WYNN) has fallen 18% over the past two days, after The Wall Street Journal published multiple claims of sexual harassment and assault against founder and CEO Steve Wynn. Steve Wynn has denied the allegations.
While the pullback is large percentage-wise, the stock remains above its 50-day moving average and is at about the same level it was trading two weeks ago, before fourth-quarter results were released.
However, the fallout of the allegations is likely to be long-lived. Steve Wynn is Chairman and CEO of Wynn Resorts, and his name is closely associated with the company and its properties. If the company fires him, it will lose the driving force behind its ambitious expansion projects, and investors are likely to become skeptical about future growth prospects. If he stays on, any legal consequences and public scrutiny related to the allegations could further tarnish the company’s reputation and the stock.
In addition, Wynn operates under close supervision from state gaming regulators. Regulators in Nevada, where Wynn has two properties, and Massachusetts, where Wynn is opening a casino is 2019, have said they are reviewing the allegations. And shares declined further yesterday after news broke that Chinese government representatives are meeting with Wynn Macau executives. Macau’s gaming concession law allows for consideration of the “reputation” of companies that are granted concessions as well as their major shareholders. Steve Wynn owns 12% of Wynn Resorts and Wynn’s Macau concession expires in 2022.
Monday also brought analyst downgrades from UBS, Morgan Stanley, JP Morgan and others.
We sold half our WYNN shares in August for a 36% gain, and have an unrealized profit of 76% on our remaining position. I’m going to sell another half of our shares today, to protect some of our remaining profit. The stock could find support here, at the 50-day, but even if it does, the stock may remain under pressure for some time. If it declines further, we’ll have protected most of our gains.