MGM Director Meister Says Company Responded ‘Rationally’ to Cyberattack

Posted on: October 18, 2023, 07:47h. 

Last updated on: October 19, 2023, 01:25h.

Keith Meister, the hedge fund manager who’s a member of the board of directors at MGM Resorts International (NYSE: MGM), said the casino operator responded “rationally” to a September cyberattack. He added that the subsequent slump by the operator’s stock is a case of too far, too fast.

Corvex Kindred
Corvex Management founder Keith Meister. The MGM board member said the gaming company responded appropriately to a September cyberattack. (Image: CNBC)

The founder and Chief Investment Officer (CIO) of Corvex Management made the comments earlier Wednesday in an interview with CNBC’s David Faber at the 13D Monitor Active-Passive Investor Summit.

Firstly, MGM is a really well-managed company that reacted very quickly to a horrible event,” said Meister in the interview. “MGM responded quickly and very, very rationally. Did exactly what you would’ve expected.”

Meister is chairman of the Audit Committee of MGM’s board of directors. Corvex Management is one of the largest institutional investors in the gaming company’s stock.

MGM Cyberattack Rewind

On or about Sept. 9, MGM discovered that its systems had been infiltrated by the notorious hacking group “Scattered Spider.”

Chaos ensued at the operator’s Las Vegas Strip and regional casino hotels. Electronic room keys became useless, slot machines went kaput, and customer and employee data became vulnerable. Scattered Spider waited several days before making a ransomware demand.

MGM didn’t pay the ransom nor reveal how much the hackers asked. Still, earlier this month, the Luxor operator said last week the attack will cause third-quarter earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) to be trimmed by $100 million. It said that it incurred one-time costs of at least $10 million related to the event. A cyber insurance policy will cover those costs. Meister said if the right answer was to pay the ransom, MGM would have considered that.

“It’s our job to be good fiduciaries, so if the right business answer was to pay the ransom, I don’t think we would’ve taken a moral position,” Meister told Faber. “It was nice and easier that we were on the right side of morality.”

Meister added that MGM was going to have to rebuild its cybersecurity and technology systems regardless of whether or not it paid Scattered Spider, potentially making the decision not to pay that much easier.

Meister Believes MGM Stock Will Rebound

Shares of MGM have suffered mightily due to the cyberattack. But analysts and the company believe the worst financial damage is confined to the third quarter.  Additionally, the operator was expected to generate $1.1 billion in property-level EBITDAR for that quarter before the ransomware incident, indicating that while $100 million isn’t peanuts, the lost earnings aren’t as severe as some market participants may have participated.

Although he may be “talking his book,” Meister is optimistic that MGM stock will rebound from the slump induced by the cyberattack.

“MGM was a plus or minus $50 stock before this happened, so the stock’s gone down about 35% because of this awful event. I promise you this: the effect this has on our (MGM) future cash flows is way less than 37%,” Meister noted.

He pointed out that the $100 million third-quarter earnings hit theoretically equates to merely a 20-cent to 25-cent pinch to the share price.