Friday, Oct. 25, 2002 | 11:24 a.m.
Shares in Wynn Resorts Ltd. began trading on the Nasdaq Stock Market today, a bittersweet achievement for Las Vegas casino executive Steve Wynn in his bid to finance the $2.4 billion Le Reve resort on the Strip.
At midmorning, the stock -- listed under the ticker symbol WYNN -- was trading at $13.03 with volume of 5.7 million shares. At some points, though, it traded below the IPO price today.
The $450 million initial public offering was a key component in the financing of the 2,700-room Le Reve, scheduled to open in April 2005. Completing the IPO represented a major challenge for the company since the market for new stock offerings has been described by experts as the worst in 25 years and many analysts were critical of Wynn's offering.
The IPO was a historic event in the career of Wynn and for Las Vegas and the gambling industry.
"You don't have half-a-billion dollar underwritings in the gaming world every day and you don't have somebody who built what is now MGM MIRAGE starting out with a whole new project every day," said Dave Ehlers, a gaming analyst with Las Vegas Investment Advisors.
"This is extremely important to the future of Las Vegas," Ehlers said. "Steve Wynn has proved that he is capable of reinventing Las Vegas and now, with a site across the street from the renovated Fashion Show mall along the northern part of the Strip, he's started again.
"For investors, it's a half-billion-dollar bet and they're going to have to wait three years to get their answer."
Ehlers, ironically, didn't buy into the IPO because of that three-year wait.
The Securities and Exchange Commission's approval of the issue came after Wynn Resorts revised its registration statement for the third time in a week.
Under the latest revision, the company offered 34.6 million shares of stock priced at $13 a share -- about 40 percent below the price initially sought.
Since the first registration statement was filed, the company dramatically increased the number of shares offered in order to raise between $426 million and $474 million, the amount initially targeted.
Steve Wynn and his Japanese business partner, Kazuo Okada, each expressed interest in buying up to $75 million of the stock under the final IPO plan. Okada heads Aruze Corp., a big Japanese gaming equipment maker.
The IPO has been a hard sell for underwriters Deutsche Bank Securities, Bear, Stearns & Co. Inc. and Banc of America Securities LLC because the project is considered a high risk and potential investors were concerned that they wouldn't see a return for at least three years.
While Wynn has a solid reputation as the developer of The Mirage, Treasure Island, Bellagio and other resorts, his new company has no track record and he was criticized when he ran Mirage Resorts Inc. for being extravagant, limiting the flow of financial information on his company and stacking the board of directors with associates beholden to him rather than public shareholders.
Experts also said investors in gaming properties may be more inclined to put money in established gaming operators like MGM MIRAGE or Harrah's Entertainment Inc. because they already generate revenue.
Representatives of Wynn's company and the underwriters could not be reached for comment this morning, but Wynn Resorts issued a statement when the SEC declared the issue effective. The company has said construction would begin immediately once financing is in place. The project will be built at Las Vegas Boulevard and Spring Mountain Road at the site of Wynn's Desert Inn hotel-casino.
By completing the IPO, Wynn Resorts turned its attention to completing its offer of second mortgage notes due 2010, which would result in $340 million in proceeds.
That junk bond offering also was given SEC approval this morning and experts say the debt component would be much easier to complete than the IPO.
The bonds are rated B3 by Moody's Investors Service and CCC+ by Standard & Poor's, both high-risk categories.
Managers of the bond offering are Deutsche Bank Securities, Banc of America Securities LLC, Bear, Stearns & Co. Inc. and Dresdner Kleinwort Wasserstein.
In addition to the IPO and the junk-bond offering, Wynn Resorts and its affiliate companies have a $1 billion credit line and are borrowing $188.5 million for furniture and equipment. The company is not expected to tap bond resources until next year. The interest rate on the bonds has not been set, but experts say the company would pay between 12.5 percent and 13 percent.
Included in the plans for the hotel are a casino with 2,000 slot machines and 136 table games and 18 restaurants. A Cirque du Soleil entertainment venue with a water theme is planned as well as a Ferrari and Maserati dealership and the only 18-hole golf course -- budgeted at more than $20 million -- on the Strip.
In addition to financing Le Reve, the company's IPO is dedicating $40 million for the potential development of casinos in Macau. Wynn and Venetian hotel-casino owner Sheldon Adelson have been licensed to operate casinos in the Chinese resort city near Hong Kong.
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