With the coronavirus costing MGM Resorts millions of dollars a day and a recent hack turning some customers sour, the company thought this was the perfect time to buy back shares. It announced they would plan for a $1.25 billion buyback originally announced on February 13, but at a new, lower rate.
The coronavirus has had a detrimental effect on MGM Resorts shares, especially with the recent Macau shutdown that closed all casinos and resorts in the territory for 15 days. This led to a $1.5 million per day loss for the company. Combined with the lower-than-expected revenues for the final quarter of 2019, the stock price took a drastic hit.
On February 12, profits were coming in at just eight cents per share, a third of what analysts had predicted. That was a 43% decline for the quarter in comparison to the same period last year.
News became even worse when MGM disclosed that a data breach affected 10.6 million customers and employees. The hack occurred in the summer of 2019 but was not disclosed until February of this year, prompting one former customer to sue the company.
Adding to the chaotic atmosphere was the resignation of Chairman and CEO Jim Murren, who stepped down from his position just prior to the initial announcement of the buyback. Murren still had time remaining on his contract with MGM but opted to leave without explanation.
MGM’s original buyback offer envisioned a share price between $29 and $34. With shares declining to $25.52, they’ve revised their tender offer to between $23.50 and $28. As of press time, MGM is currently trading at $23.30.
This could be a great time for shareholders to hold on, as analysts suggest the buyback indicates that MGM is currently undervalued. An upcoming pitch to Japan might help the operators fortunes, and stocks, rebound.
In May, executives from MGM are expected to travel to Osaka to pitch their company as a prime option for receiving one of the licenses. Murren is expected to accompany the group. In a statement issued at the time of his resignation, he explained, “I’m absolutely sure I’m going to be involved in the Japan project. In fact, I’ll probably be even more involved in the Japan project as time goes by.”
