MGM Resorts (NYSE: MGM): IAC Now Owns 20% International Shares

Posted on: May 8, 2024, 02:09h. 

Last updated on: May 9, 2024, 09:04h.

Barry Diller’s IAC/InterActiveCorp (NASDAQ: IAC) now controls 20% of MGM Resorts International’s (NYSE: MGM) shares outstanding, making the conglomerate by far the largest investor in the casino giant.

IAC CEO Joey Levin in a 2019 interview. He said the company now owns 20% of MGM Resorts stock. (Image: Patrick Fallon/Bloomberg)

In his first-quarter letter to investors, which coincided with the company’s earnings report out Tuesday, IAC CEO Joey Levin told shareholders the firm now controls 20% of MGM equity. That makes the gaming operator IAC’s biggest investment, though Levin noted that while the Bellagio operator is fundamentally sound, the performance of the stock doesn’t reflect those strong fundamentals.

Our largest investment, MGM, did similarly well with a similar failure to move its share price, posting record first quarter financial and operational results and generating Free Cash Flow of just under $400 million — we are pleased to own over 20% now,” wrote the IAC chief executive officer.

A report in Barron’s indicated IAC’s unrealized gain on its MGM stake is close to $163 million. That despite the fact the stock is off 7.6% over the past 12 months and 10.2% year to date.

MGM Buybacks Helped IAC Stake Grow

In August 2020, IAC bought $1 billion worth of MGM shares and added another $1 billion over the subsequent three months.

In February 2022, Diller’s company partnered with MGM to buy $405 million worth of the casino operator’s shares sold by Keith Meister’s Corvex Management. Since building its stake in MGM in 2020, IAC hasn’t pared it.

Conversely, Diller’s firm has increased its position in the largest operators on the Las Vegas and that increased percentage has been helped in large part by MGM’s prolific share buyback efforts — something Levin acknowledged in his fourth-quarter letter to IAC investors.

When it reported first-quarter results last week, MGM told investors it bought back 12 million of its shares in the January through March period, adding that since 2021, it has slashed its shares outstanding tally by 36%.

How IAC Figures as an MGM Investor

When IAC initially got involved with MGM nearly four years ago, Diller’s company noted it viewed the gaming company as a long-term investment supported by a strong balance sheet, an impressive Las Vegas portfolio, and exposure to online gaming.

At the time, the move was a departure from the norm for IAC because the firm typically doesn’t take passive positions in companies and sit on stock. However, it’s done just that with MGM while not ruffling feathers at the casino operator.

As noted above, IAC is MGM’s biggest shareholder and that heft is truly impressive. The conglomerate owns 10x as much MGM equity as does Corvex, and IAC’s percentage of MGM shares held is slightly more than that of fund giants Vanguard, BlackRock and State Street Global Advisors combined.