Casino operator MGM Resorts says it’s doing more to help its employees through the COVID-19 pandemic, although most of that help is coming from outside the company.
On Friday, MGM issued a trading update hailing the “strong start” its domestic operations had enjoyed over the first two months of 2020, before those operations were forced to close to minimize further spread of the COVID-19 coronavirus.
MGM’s net income was around $1.3b through the end of February, although the company did get a $1.5b pre-tax gain thanks to January’s MGM Grand/Mandalay Bay deal, so they actually lost $200m, but hey, accounting. Las Vegas Strip earnings (before rent payments) were up 24% while regional operations improved 42%.
Net revenue was down 10% due to the 15-day shutdown of MGM China’s casinos in Macau, and MGM warned that its Macau operations remain a shadow of their former selves due to ongoing travel restrictions, all of which has led to “substantial operating losses” in March.
MGM’s new CEO Bill Hornbuckle said the company had a reserve of around $3.9b with which to support its liquidity, but MGM was nonetheless being asked to make some “very difficult decisions,” particularly regarding its roughly 75k employees.
Hornbuckle posted a video message to staff this week warning them that “the hardships, I’m afraid, will be real for many of you for some time.” Hornbuckle said he personally contributed $100k to the $1m emergency relief fund MGM established this week and he expects other members of MGM’s senior management to do likewise.
That fund has since grown to $4m, although that rise came from outside the company. Singer Bruno Mars, who had a residency at the MGM Park Theater until the company shut things down, donated $1m while the estate of MGM founder Kirk Kerkorian chipped in another $2m.
All of which makes former CEO Jim Murren’s $32m golden handshake look all the more out of whack. Murren announced his intention to leave nearly two years before his current contract was up and then had MGM reclassify his departure as a “termination without good cause,” thereby ensuring that he got his full compensation, including $12m in severance pay.
MGM’s shares, which had enjoyed a significant rise this week after bottoming out at around $6, are currently trading down around 9% at just over $12. The shares were worth over $32 in mid-February, just before Murren sold $22.2m of his holdings.
Hornbuckle was announced as the new chair of MGM China on Friday, taking over from the departing Murren. MGM China also announced that it would spend $41m issuing a final dividend to shareholders, equal to around 16.3% of the company’s 2019 profit. Optics, people, optics.
