Please ensure Javascript is enabled for purposes of website accessibility

Las Vegas Sands Facing Multibillion-Dollar Lawsuit Over Macau License

By Travis Hoium - Apr 7, 2016 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A lawsuit more than a decade in the making could cost Las Vegas Sands big.

Image source: Las Vegas Sands.

Sheldon Adelson and Las Vegas Sands (LVS -1.66%) are facing a huge headache in the form of a lawsuit from a former business partner in Asia. Asian American, which is run by Taiwanese businessman Marshall Hao, is suing for 70% of the company's profits in Macau between 2004 and 2022. If successful, the suit would cost Las Vegas Sands $8 billion -- and the bad news is that a Macau court has ruled against a motion to dismiss the case, so for now it looks like we're heading toward a trial. 

How Las Vegas Sands got here
In 2001, Las Vegas Sands was looking to enter the Macau market, which was being opened up to outside competitors for the first time. It partnered with Asian American to work on a bid, but soon Las Vegas Sands replaced the company with Galaxy Entertainment as a partner.

A rendering of The Parisian, currently under construction in Macau. Image source: Las Vegas Sands.

It's this ending of the partnership and move to Galaxy that has led to the lawsuit. Asian American is alleging that Las Vegas Sands broke the terms of their partnership agreement and used designs and trade secrets in its eventual bid with Galaxy.

What's key here is the convoluted process Macau ended up using in determining winners of concessions and subconcessions in Macau. Galaxy and Las Vegas Sands were supposed to be in a concession together, but their relationship deteriorated and there were only 3 concessions to give out. The Macau government decided they would allow Las Vegas Sands to operate under a subconcession, under Galaxy, leading to a fourth concession. 

Eventually, this led to Wynn Resorts (WYNN -0.03%) and SJM both getting subconcessions as well, which went to Melco Crown (MLCO 1.87%) and MGM Resorts (MGM 1.97%) respectively. So the battle between Asian American, Galaxy, and Las Vegas Sands had far reaching repercussions. 

Just another court battle
This isn't the only court battle Las Vegas Sands is facing either. Former Sands China executive Steven Jacobs is suing over wrongful termination, and that case is still moving forward in a Nevada court. That case is set for trial this summer, and could be a distraction for the company along with a potentially large cost if it loses. 

Las Vegas Sands facing more uncertainty
The fact that Asian American's lawsuit hasn't been thrown out has to be of some concern to Las Vegas Sands. If the suit goes all the way to trial and the company loses, even if it isn't the full 70% of profits amount, the settlement could be substantial.

For years, Adelson and Las Vegas Sands have dismissed the idea that either Jacobs' suit or the Asian American suit has any merit. But both are moving forward, and that indicates that courts feel otherwise. Given that millions, and potentially billions, of dollars are at stake, these cases are worth keeping an eye on.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wynn Resorts, Limited Stock Quote
Wynn Resorts, Limited
$62.80 (-0.03%) $0.02
MGM Resorts International Stock Quote
MGM Resorts International
$33.65 (1.97%) $0.65
Melco Crown Entertainment Limited Stock Quote
Melco Crown Entertainment Limited
$5.44 (1.87%) $0.10
Las Vegas Sands Stock Quote
Las Vegas Sands
$33.26 (-1.66%) $0.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.