|Senior executives in the land-based casino industry announced plans to offload large tranches of company stock last week, prompting gaming industry analysts to wonder if the insider-selling is any indication of weakening in the gaming sector. |
Four executives of Harrah’s Entertainment Inc. filed with the US Securities and Exchange Commission (SEC) to sell $17.33 million in company stock, while two senior MGM MIRAGE executives filed separately with the SEC to sell more than $7 million in company stock.
The biggest Harrah’s sale was by Gary Loveman, president and Chief Operating Officer, who filed on May 6 to sell 250,000 shares for $12.5 million. Loveman retains 805,000 stock options, company officials said. Loveman had no comment on the sale.
The three other Harrah's officials who filed to sell shares last week were: Charles Atwood, chief financial officer, who filed to sell 71,000 shares for $3.5 million; Richard Mirman, senior vice president of marketing, 24,250 shares for $1.23 million; and Brad Martin, director, selling 2,000 shares for $100,000.
The sales represented 42% of Atwood's reported stock holdings in January, 17% of Mirman's, and 9%of Martin's. No comment was forthcoming from the company regarding the sales.
Separately, MGM MIRAGE Chairman and Chief Executive Terry Lanni filed Thursday to sell 100,000 shares, which were valued at $4.1 million. John Redmond, chief executive of subsidiary MGM Grand Resorts, filed two weeks ago to sell 77,500 shares, valued at $3.02 million.
The sales represent 9%of Lanni's most recently reported stock holdings, and 16% of Redmond's. The stock holdings of both executives are almost exclusively stock options.
MGM MIRAGE spokesman Alan Feldman did not directly comment on the sales, saying: 'I don't think this is unexpected with the stock price at a recent high,' Feldman said. 'We're seeing this not only in the casino industry, but in other industries where stocks have performed well in recent months.'
Insider sales of gaming industry shares stood at a six-year high this year, and one gaming industry analyst said the trend was a 'red flag' for investors thinking of investing in gaming stocks.
“Management of gaming companies have been pretty good traders of their own stocks,” said Bear Stearns analyst Jason Ader, adding that “Business is still strong, and we feel the second quarter will be extremely strong. The point is that investors looking to take aggressive positions at current levels may want to tread a little more cautiously, given the insider selling that's been going on.”
Ader calculated a 'sell/buy' ratio for insider activity in the gaming industry -- the amount of stock sold by executives, divided by how much stock they bought. In 2001, the ratio hit 31 -- and stands at 214.6 so far in 2002, which means that industry insiders are selling almost 250 times the amount of company shares that they are buying. These are by far the highest ratios of the last six years. Insider selling was most intense among executives of large casino operating companies - in this sector, the sell/buy ratio was 483 in 2000, and 251.2 so far in 2002.