When MGM Resorts acquired Mirage from Steve Wynn in 2000 during a hostile takeover, he lost control of the Las Vegas gaming giant he had spent over a decade building. It wouldn't be long after that before Wynn Resorts (NASDAQ:WYNN) was constructing Wynn Las Vegas and Wynn Macau.
Perhaps the biggest move Steve Wynn made in the past decade was to kick his former partner out of the company and redeem his shares on the cheap. The move not only gave Wynn more control of the company, but will ultimately be a massive buyback of shares at an extremely attractive price.
The Okada controversy
After a yearlong investigation into founding partner Kazuo Okada's dealings with gaming officials in the Philippines and Macau, Wynn Resorts announced that it had deemed Okada "unsuitable" as a partner, board member, and gaming-license holder for the company. It redeemed 24,549,222 shares he owned for a promissory note of $1.94 billion with an interest rate of 2%, due on Feb. 18, 2022.
The move to kick Okada out of the company has been challenged in court, but so far it's been upheld, and after five years I'd be surprised if it's overturned. As a result, Wynn made a forward purchase of nearly 25 million shares for $79.02 per share. It doesn't take a rocket scientist to figure out that that's a great deal, given that shares closed trading Thursday at $134.10 each.
Steve Wynn holding tenuous control over his company
One of the reasons the Okada redemption was such a big deal to Steve Wynn is that it gave him more control of his company. Wynn himself owned about half as many shares as Okada after splitting his shares with ex-wife Elaine Wynn in their divorce. However, Elaine is restricted from selling shares, and must vote with Steve on matters relating to her shares (she is challenging both restrictions in court).
With the Okada redemption, Wynn regained control of nearly a quarter of his company. And that reduced the risk of a hostile takeover, which he has feared since his days owning Mirage Resorts.
A buyback investors shouldn't forget about
Owning shares of Wynn Resorts is really a bet on Steve Wynn himself. He controls the company, and it's his vision that's being executed on a day-to-day basis. And although he doesn't have an iron grip on the shares of Wynn Resorts, for better or worse, his control of a quarter of the company's votes will make it difficult to execute a buyout or even fire Wynn himself.
This is a big shift from when Okada had nearly the same control of Wynn Resorts as the Wynn family did. Okada could have executed a coup if he wanted to, or sold the company out from under Steve Wynn. It's been five years since Okada was removed from Wynn's board of directors and his shares were redeemed, but that remains one of the most important episodes in the company's history. And investors shouldn't forget that it may be the most consequential move Steve Wynn has ever made to keep control of his company.