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Why MGM Resorts Stock Dropped 5% This Morning

By Rich Smith – Jun 25, 2020 at 2:52PM

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Coronavirus upsurge spooks the casino operator.

What happened

MGM Resorts (MGM -0.90%) is scared of coronavirus. The measures it just announced to combat the virus's spread and preserve its business in the face of a still-growing pandemic spooked investors, too.

In 2:15 p.m. EDT trading, MGM shares are down 3.4% after dropping more than 5% earlier this morning.

Man in tuxedo and top hat wearing a golden face mask.

Image source: Getty Images.

So what

Why? As you've probably heard by now, coronavirus is back -- with a vengeance.

Nationwide, the U.S. recorded 34,700 new coronavirus cases on Wednesday, the most recorded since this number peaked at 36,400 in a single day in April. Arizona, California, Florida, Mississippi, Nevada, Texas, and Oklahoma all set new one­-day records. Arizona -- Nevada's next door neighbor -- is on track to run out of hospital beds in under a month at the rate infection numbers are growing, reports Marketwatch.  

To respond to the growing crisis, MGM announced this morning that it is revising its policy on face mask use within its resort hotels and casinos. According to a statement issued by the company:

It is clear that the coronavirus still presents a significant public health threat, and masks have proven to be one of the best ways to curtail the spread. We want guests and employees to feel comfortable that we are putting their health and safety first.

Therefore, in addition to resort employees, who were already required to wear masks, MGM says "guests and visitors" will now "be required to wear masks at all MGM Resorts properties throughout the United States."  

Guests certainly can use their discretion deciding whether or not to comply with the new in-house rules, but "guests who do not wish to comply will be asked to leave the property." 

Now what

MGM says its newly expanded mask policy goes into effect on Friday, but investors aren't waiting for tomorrow and have begun selling off their shares already. Whether that proves the right call depends on whether more of MGM's customers are offended by the new policy and decide to "leave the property" than are reassured that the new mask policy actually makes it safer to return to MGM Resorts.

Only time will tell which way this is going to play out.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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