Sands IPO Continues to Highlight Macau Risks (LVS, WYNN, MPEL, MGM)

Las Vegas Sands Corp. (NYSE: LVS) failed to see any huge boost of its Asian asset IPO in Hong Kong.  Shares fell 10% on its debut that raised about $2.5 billion.  Sands China Ltd. closed down at 9.32 Hong Kong dollars, but shares had initially dropped under the 9-Dollar handle before recovering.  The pricing was at 10.38 in Hong Kong dollars, and this was near the lower-end of its price range.

Wynn Resorts Limited (NASDAQ: WYNN) has already gotten its IPO behind it, and frankly that came out when investors were more inclined to nibble on what many might consider a tracking stock rather than a fully independent operation.  We had recently noted how investor reactions posed a risk to Las Vegas Sands after the recent Melco Crown Entertainment Ltd. (NASDAQ: MPEL) earnings report was good but was received coldly.

We had penciled in about $3.0 to $3.3 billion as the planned capital raise from the IPO that would then go toward restarting construction of its large Macau project and paying down debt.

Sheldon Adelson tried to note that the one day reception is not any indication of the long-term prospects.  But it seems that there were a couple of issues.  The price was higher in a post-bubble world than some might have felt comfortable with.  Another issue is that this IPO came out at a time when Dubai has added to the global headline risk aversion.  These may not be directly tied, but that is the new world for you.

Another issue to consider is that the Las Vegas Sands operation is effectively “betting the come” as the construction is supposed to resume in early 2010.  There is already a flurry of competition, and recent regulation and the risk of future regulation could at any moment limit the number of Chinese gamers who can head to Macau.  That is deemed as a lower risk, but a risk nonetheless.

MGM Mirage (NYSE: MGM) may have the most to lose now if there is not a welcome rug laid out this week and next to this Sands IPO, as it is still a ways out from any formal IPO there.  Las Vegas Sands Corp. (NYSE: LVS) is down only about 1% at $15.62 right before the open.

Jon C. Ogg
November 30, 2009