MGM Resorts International Announces $1.25 Billion Share Buyback

MGM Resorts International Announces $1.25 Billion Share Buyback

MGM Resorts International, which operates Resorts, Casinos, & Shows worldwide announced a share buyback plan of $1.25 at a reduced share price.

The new price adjustment

MGM Resorts operates legendary properties at the Las Vegas Strip, like the Bellagio and Mirage. The company recently said that its new share repurchase program will be executed at a new price band between $23.50 and $28. Earlier, the company was planning to execute the buyback at prices between $29 to $34.

MGM Resorts International Announces $1.25 Billion Share Buyback

The company’s stock is being affected because of the recent coronavirus outbreak. Most companies in the travel and leisure industry have suffered because of the virus, especially if they have exposure to Macau. MGM also runs two integrated resorts in the Chinese city, which has shot down its stock price. On Tuesday, the shares of Mandalay Bay and Luxor went down by almost 20% in the last month alone. The prices are lower by 24.71% year-to-date and went down by 31.50% below their 52-week highs.

Federal Reserve jumps up

The Federal Reserve has acknowledged the impact of the COVID-19 (coronavirus) outbreak and announced a 50-basis points interest rate cut as well. This figure was significantly above the quarterly goals of the Feds which is only a quarter of a percent. However, their measures have failed to stimulate equities. Gaming stocks are still suffering along with the broader markets.

MGM’s shares have gone down by 5.5% on higher than average volumes. The stock is trading at $23.66 and it may go down the $23.50 limit that MGM has set for the share repurchases. The company’s overseas business is affected and their domestic business is also under threat because of the virus. MGM is the largest operator in Las Vegas, and a reduction in leisure travel and gaming could impact the company severely.

However, this fall could help the company buy back its shares at better prices. Companies generally aim to buy back shares at higher valuations but scrap these plans when prices fall. Buying at a lower price will help MGM save cash and stop itself from becoming financially fragile.

Harvard University suggests that buying during boom periods at higher valuations could lead the companies susceptible to issues when profits finally disappear. In the last bull market of 2007, several buybacks occurred but the markets crashed soon after, leaving many companies vulnerable. Analysts are expecting MGM shareholders to use the $8.2 billion it received via Circus Circus, Mandalay Bay and other sales to the shareholders.

About sherlock

Sherlock Gomes loves to write and express his views on anything related to Gaming, Gambling, & Casino. He has been covering Gaming for more than two years now.