VICI Properties in the Crosshairs: Why Activist Investors Are Circling the Gaming REIT

• The casino owner is among the stocks appearing on those held by a swap broker
• Analyst speculates that the broker may be the go-to choice for activists looking to discreetly build positions in various companies
• No activist investor has overtly declared interest in VICI

A leading Wall Street analyst warns that VICI Properties’ (NYSE: VICI) current valuation and market position could make the gaming REIT a prime target for activist investors seeking a shakeup.

In a report which focused on PayPal (NASDAQ: PYPL), Gordon Hackett’s Don Bilson notes SG Americas, the US broker deal arm of French Bank Societe Generale, may be the one of the go-to institutions for activists looking to discreetly build positions in stocks.

PayPal and VICI, which owns the land of Caesars Palace on the Las Vegas Strip, are among dozens of stocks listed on a Form 13 filing SG Americas made yesterday with the Securities and Exchange Commission (SEC).

However, it’s common for professional market participants to amass large positions in stocks by way of swaps and there’s some recent precedent for such moves in the gaming industry.

For example, mercurial billionaire Kenneth Dart is now the largest shareholder of FanDuel owner Flutter Entertainment (NYSE: FLUT) shares — a position amassed entirely through derivatives. Flutter also appears in the SG Americas filing.

Why Activist Investors Use Swap Brokers

It’s not yet known if this is the state of play with VICI or any of the other stocks on the SG Americas, but the primary reason some activist investors use swaps purchased through broker dealers is to amass positions in a stock without being detected.

An activist can therefore discreetly increase its position in a company for an extended period by remaining anonymous via a counterparty, without the company’s or the public’s knowledge,” according to Harvard Law School. “This type of activist strategy can put a company at a disadvantage because there’s no early warning signal via a 13F filing that a shareholder is holding a large block of voting shares or potential shares.”

Upon amassing 5% or more of a company’s shares, investors must file a Form 13G or 13F with the SEC. The latter often indicates some form of activist interest though it’s not a guarantee of that. On the other hand, 13G’s are typically used by passive investors.

For example, Tilman Fertitta files 13G’s to disclose his stake in Wynn Resorts (NASDAQ: WYNN). Filers of 13G’s can amend to 13F’s if they decide to take a more active role in pursuing change at a company.

VICI Has Experience with Activists

Activist investors have previously been engaged with VICI. In 2020, Jonathan Litt’s Land & Buildings Investment Management, LLC (L&B), then a shareholder in the REIT, pushed Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) — the other listed casino REIT — to merge with VICI, but no deal materialized.

Due in part to ongoing negotiations (and headaches) prompted by the regional master lease with Caesars Entertainment (NASDAQ: CZR), VICI could be a target for activists, but for now that’s just speculation.