MGM released its third-quarter earnings report earlier this week and yes they sold the Bellagio but will keep running it, and yes they sold Circus Circus but won’t keep running it because MGM is fancy pants and Circus Circus is not, and yes the hedge funds and the rest of Big Money that owns like 85 percent of the U.S. stock market are generally quite pleased with MGM for doing those things.
(MGM had already impressed its financial masters earlier this year with its innovative program to fire people in Las Vegas.)
But while analysts think MGM selling Circus Circus and “monetizing” the Bellagio is quite a clever and good thing for MGM’s bottom line, you might be wondering what MGM will do with what is effectively a windfall induced by financialization jiggery pokery.
If so, CEO Jim Murren’s got you covered.
“We expect that the agreements to sell Circus Circus Las Vegas and to monetize the Bellagio real estate assets will provide us with net after tax cash proceeds, including expected debt breakage costs, of $4.3 billion, a majority of which will be used to fortify our balance sheet and then return capital to shareholders,” Murren told analysts and reps for Big Money.
Will there be buybacks?
Like selling property and then managing it, stock buybacks are another form of economic financialization. A corporation takes shares off the market to (usually) raise the stock price, benefiting shareholders and (usually) enhancing the wealth of top corporate executives whose compensation packages are tied to share price.
And yes. Of course there will be buybacks.
MGM is “focused … on returning capital shareholders as we have been doing in the form of dividends and share repurchase,” Murren said.
And they indeed “have been doing” the buyback thing; MGM has been in the process of spending $2 billion to take shares off the market.
Some people, by the way, say buybacks are no good and very bad because they’re just “corporate self-indulgence,” the result of boardrooms “obsessed with maximizing only shareholder earnings to the detriment of workers and the long-term strength of their companies, helping to create the worst level of income inequality in decades.”
But those people (Sens. Chuck Schumer and Bernie Sanders, in this instance), probably don’t even believe in Nevada’s official unofficial motto: What’s good for MGM is good for Nevada.
Speaking of which, MGM revenue was up 9 percent in the third quarter, and earnings up 14 percent. So good for you, Nevada.
“Looking forward, we feel good about the fourth quarter and for the 2020 financial year,” Murren explained when announcing the company’s third-quarter results.
In other words, now, clearly, is no time to raise the gaming tax.