MGM Resorts International is a holding company which, through its subsidiaries, owns and operates casino resorts. The group owns and operates nearly 30 resorts throughout the USA – including the famous MGM Grand hotel and casino in Las Vegas – and also has a majority interest in the MGM Macau resort and casino in China. The company is listed on the New York Stock Exchange and currently has a market capitalisation of $6.4 billion.
MGM Resorts International is likely to be impacted significantly by Covid-19 in the short term. In the US, its resorts have been temporarily closed to the public since 16 March. However, in a recent trading update, the company advised that it has operating cash and cash investment balances of nearly $4 billion, and that it is undertaking a thorough review to minimise costs (60%-70% of its domestic operating expenses are variable). It also said that its liquidity position, unencumbered assets, and cost cuts will enable it to fund current obligations for the “foreseeable future.”
Looking at insider transaction activity, we think it’s interesting that a number of insiders have taken advantage of recent share price weakness and purchased MGM Resorts stock recently. Since 30 March, MGM Chairman Paul Salem, President William Hornbuckle, and CFO Corey Sanders have purchased nearly 600,000 shares combined, while Corvex Management, a hedge fund that is represented on the board, has spent nearly $20 million on stock. In our view, this pattern of buying is highly bullish as it suggests that insiders are confident the stock will bounce back.