|Casino tycoon Steve Wynn packed a crowd of Wall Street money managers and stock researchers into Manhattan's St. Regis Hotel last Thursday to pitch his dream project: “La Reve”, a megaresort to rival his earlier achievements at the Mirage (now MGM Mirage after MGM bought it from Wynn) and the Bellagio. |
Despite Wynn’s stardust reputation for building megaresorts, not all analysts were convinced: After all, La Reve isn’t projected to open until 2005 at a cost of $2.4 billion.
'It's audacious to think we'd invest in a something that's just a concept when valuations all around are crashing,' said one unnamed researcher. Members of his firm left the St. Regis presentation before it ended, he said.
Wynn hopes to raise $470 million this Wednesday from the sale of 20.5 million shares in Wynn Resorts Ltd, a company he co-owns with Japanese video game developer Kazuo Okada. The shares are expected to price for between $21 and $23 each.
Wynn’s track record at The Mirage and Bellagio means that hard-headed investors are being asked to invest as much in the man as in the plan.
However, with depressed markets and a prevailing perception that the days of the megaresorts are over, investors are in a position to be picky. In recent months, a string of IPOs (initial public offerings of shares) have been deferred or postponed by forcing the asking price lower than the issuer was prepared to go.
In the context of the current IPO market, the sale of Wynn Resorts stands out. Investors have for the most part rebuffed all but the safest bets, sticking mainly to companies with long track records of profits and growth.
Wynn Resorts, by contrast, is structured more like a start-up biotech company waiting for a new drug to be developed, said David Klaskin, the president of Chicago-based fund manager Oak Ridge Investments.
'These days we invest in actual cash flow,' said Klaskin, whose team has looked at Wynn Resorts but opted not to invest. 'This doesn't fit the criteria.'
The investor will have to first wait three years for Le Reve, as the casino will be called, to be completed, taking on an estimated $1.5 billion in debt in the process. At that point the debate becomes about how much money the casino can make, which complicates the process of determining the value of the company's shares.
Wynn is obviously banking on high -rollers, and plans to set a new standard for casinos, according to the company's prospectus.
Le Reve, (French for 'the dream,”) is to be developed at the site of the old Desert Inn casino on the Las Vegas strip.
Le Reve will include about 5 million square feet of space, making it larger than the Mirage but smaller than Bellagio. It will include a 45-story hotel tower, a three-acre lake, a man-made mountain, and a newly designed 18-hole golf course -- the only one on the strip.