U.S.-based casino operator Wynn Resorts Ltd is to investigate the allegations of sexual misconduct made against its founder and chairman-cum-chief executive Steve Wynn (pictured in a file photo).
The firm said on Friday it would form a special committee consisting solely of independent directors to investigate the claims against Mr Wynn. It will be chaired by Patricia Mulroy, a member of the board’s corporate governance and compliance committees and a former member of the Nevada Gaming Commission, Wynn Resorts said in a statement emailed to Reuters.
The announcement of the enquiry followed an article by the Wall Street Journal detailing allegations of sexual misconduct made against Mr Wynn by former Wynn Resorts employees.
Wynn Resorts is the parent company of Macau-based casino operator Wynn Macau Ltd. Mr Wynn is also chairman and chief executive of Wynn Macau Ltd.
The Wall Street Journal article included allegations by a manicurist that allegedly received a US$7.5-million settlement from Mr Wynn after complaining he ordered her to have sex with him in 2005.
In a statement sent to media outlets in the U.S., Mr Wynn denied the allegations featured in the article.
“The idea that I ever assaulted any woman is preposterous,” Mr Wynn reportedly said. “We find ourselves in a world where people can make allegations, regardless of the truth, and a person is left with the choice of weathering insulting publicity or engaging in multi-year lawsuits. It is deplorable for anyone to find themselves in this situation.”
The sexual misconduct claims against Mr Wynn had an immediate negative impact on the stock price of Wynn Resorts. The company’s stock dropped by more than 10 percent on Friday once the story was made public.
“Despite the reaction in shares, the majority of [the] news is not new,” Deutsche Bank Securities Inc analysts Carlo Santarelli and Danny Valoy wrote on a note on Friday. “Reports of the settlement were present for some time, including as recently as the end of December when a Bloomberg article was published regarding it. We believe some of the reaction in shares… stems from the significant level of detail provided in the Wall Street Journal article, which in and of itself has likely created a somewhat emotional market response.”
They added: “We believe a substantial portion of the contents of the Wall Street Journal article were known at the company/board well in advance of [Friday]. That being said, we would not be surprised to see further follow up, and potential further revelations, as has been the case in other similar circumstances.”
Regulatory investigations underway
Both the Massachusetts Gaming Commission and Nevada Gaming Control Board have announced that they would independently investigate the allegations raised in the Wall Street Journal article, according to media reports. Wynn Resorts is developing a casino property in Boston, in the U.S. state of Massachusetts, and has gaming operations in Las Vegas, in the U.S state of Nevada.
Mr Wynn meanwhile resigned as finance chair of the Republican Party in the United States over the weekend.
In related events, investment bank Morgan Stanley and brokerage Union Gaming Securities Asia Ltd both downgraded the stock of Wynn Macau Ltd respectively to “equal weight” and “hold”.
Morgan Stanley analysts Praveen Choudhary, Jeremy An and Thomas Allen wrote in a Sunday note: “The share price [of Wynn Macau Ltd] has more than tripled since [Cotai casino resort] Wynn Palace opened its doors in August 2016. The stock and earnings could continue to rise thanks to an upcycle, and consensus remains bullish – but we expect peers to perform better from here for several reasons, including rich valuation.”
While not referring directly to the sexual misconduct claims against Mr Wynn, they added: “Management continuity is important: Wynn Macau Ltd has received a premium for its stable management and corporate structure, but could face derating if this were to change for any reason.”
Grant Govertsen from Union Gaming said in a Monday note the brokerage was downgrading the shares of Wynn Macau Ltd driven by a confluence of factors, including “uncertainty” surrounding the sexual misconduct allegations against Mr Wynn and subsequent Wynn Resorts’ board investigation announcement, and potential for a review of the Macau gaming regulator on the heels of already-announced regulatory reviews in the United States.
Brokerage Sanford C. Bernstein Ltd said in a Monday note that while it maintained “a long-term positive fundamental view” on Wynn Macau Ltd, “the dynamics surrounding the allegations, the uncertainty surrounding the outcome, and the negative news commentary that these events will continue to generate are likely to be a headwind on the stock.”
Analysts Vitaly Umansky, Zhen Gong and Cathy Huang added: “Wynn Macau Ltd stock is likely to face a significant headwind and a short-term trade off and funds may rotate out of Wynn Macau Ltd into other competitors in the near term (in particular Sands China Ltd due to U.S. investor sentiment and Galaxy Entertainment Group Ltd which is perceived to operate in a similar high-end market segment).”
Apr 26, 2018
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