Chanos, Famed Short Seller, Sees Macau Concession Risk for Las Vegas Sands, Wynn Resorts

Posted on: June 23, 2020, 08:43h. 

Last updated on: June 24, 2020, 08:20h.

Kynikos Associates founder Jim Chanos, one of Wall Street’s most noted short sellers, believes Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) are facing Macau concession renewal risk that’s not being adequately reflected in current share prices.

Jim Chanos Sees Macau Risk In Sands, Wynn
Kynikos Associates founder Jim Chanos says Sands and Wynn shares don’t account for Macau renewal risks. (Image: Getty Images)

Chanos made the comments Monday at the Bloomberg Invest Global virtual conference. He pointed to trade tensions between the US and China as an issue that could weigh on the gaming license renewal process. Permits for all six Macau concessionaires expire in 2022, but some analysts are saying the rebidding timeline could be pushed back to 2023 because of delays forced by the coronavirus pandemic.

If that were to be negotiated downward, which is a real possibility, particularly if the trade war continues, that would have material effect on their cash flow and profits,” Chanos said of LVS and Wynn.

Sands China, the Macau arm of LVS, operates five integrated resorts in the world’s largest casino hub, while Wynn Macau runs two venues there. The lone Chinese territory where gambling is permitted accounts for the bulk of earnings and revenue for both Sands and Wynn.

Why it Matters

Chanos did not explicitly say if Kynikos has open short positions in either LVS or Wynn. Nor did he mention MGM Resorts International (NYSE:MGM), the other US-based gaming company that’s also a Macau concessionaire. MGM China operates two integrated resorts there – MGM Cotai and MGM Macau.

Broadly speaking, gaming stocks are favored targets of bearish traders this year because the group was among the most repudiated during the initial spread of COVID-19. Specific to Sands, that stock is scuffling alongside its peers this year. But it hasn’t drawn short interest on par with Wynn or regional operators. Shares of the Venetian Macau operator are up 40 percent off the March lows.

Wynn stock is higher by nearly 135 percent off its March bottom. But it is down 9.43 percent over the past week amid a flare-up of coronavirus cases on mainland China. The drop also reflects speculation that an already fragile trade deal between the world’s two largest economies could collapse.

Last year, analysts acknowledged there is some concession renewal risk for US-based operators stemming from trade hostilities, but even with that, “remote” was the term often used to describe the odds LVS and Wynn Macau licenses won’t be renewed.

Chanos Track Record

Like any other investor, Chanos gets some calls wrong while nailing others. For example, he confirmed at the Bloomberg conference that Kynikos is still short Tesla (NASDAQ:TSLA), a stock that’s more than quadrupled over the past year.

He’s also been on the right side of some of the most spectacular bearish trades in recent history, including being among the first to expose the Enron fraud before that company collapsed in 2001.

This year, the short seller rang up gains on three big bearish bets – Hertz Global Holdings, Luckin Coffee, and Wirecard. Kynikos is no longer involved with Hertz, the car rental firm that filed for bankruptcy last month.

Luckin, the Starbucks of China, is down 92 percent this year amid allegations the company falsified revenue. Wirecard, a payment processing firm, said yesterday $2.1 billion it told investors it had in its accounts was never really there, stoking talk the German company could be insolvent.