Carl Icahn buying 9.8 percent of Caesars Entertainment has returned the most celebrated activist investor into the gaming space.
But Icahn isn’t alone. Investors with a reputation for shaking things up to drive up stock prices have been moving in since last year. Consider:
- Caesars. Before Icahn, there were others, such as HG Vora who bought a stake in September prompting Caesars to get defensive advice from Goldman Sachs.
- MGM Resorts has drawn investment from Corvex Management, and Starboard Fund, which famously shook up Darden restaurants and helped drive up the stock price 60 percent in 2016.
- Playtech has attracted Jason Ader, who earlier helped convince Amaya to sever ties with CEO and chief shareholder David Baasov. Today the company, now the Stars Group, is a diversified online behemoth with a nearly $5 billion market cap.
So far, the activists appear to be having success in positioning the companies for major changes and, aside from Caesars initial apprehensive reaction, they appear at least somewhat open to working with their new investors rather than combating them.
In Caesars’ case, the company said it will talk with Icahn, including soliciting his advice on a new CEO to replace Mark Frissora, who is soon scheduled to leave.
No shrinking violet, Icahn quickly suggested Tony Rodio, CEO of little Affinity Gaming and former CEO of Tropicana Entertainment, another success story for Icahn who increased that company’s value several times before selling for $1.85 billion to Eldorado Resorts.
Icahn’s goal for Caesars is a lot more than a new CEO. He wants the company to sell itself.
MGM almost immediately reported that it was having constructive discussions with its new investors and followed that up with creating a committee to study the company’s real estate holdings and make recommendations on what to do with them. On the three-member committee is Keith Meister of Corvex, who had also won a seat on MGM’s board of directors.
Additionally, Ader won one of his goals at Playtech when founder and former CEO Teddy Sagi sold his remaining shares. Sagi denied his sale was in response to Ader, who had warned that Sagi’s former legal problems would keep the company out of the emerging US online gaming industry if he remained a major shareholder. Regardless of Sagi’s reasons, he’s gone and Playtech has just announced a major supplier agreement with GVC, meaning the company will be providing products to the online market in New Jersey where GVC operators.
Of course, the point of all the activism isn’t just to rattle management or win tactical battles. It’s to raise stock prices.
In that regard, the activists haven’t moved any needles yet. MGM is about flat with its September price when the activist holdings were revealed. Playtech is off around 10 percent since then. And Caesars, which was around $12.80 when positions by HG Vora and other activists were revealed, is currently around $8.50.
In fact, the stocks have had similar patterns. Bumps up when activist stakes were announced, and then settling down. Even the arrival of Icahn at Caesars provided just a blip before another dip.
However, the activists have records of success. And Icahn, especially, has demonstrated the ability in gaming to buy assets that eventually provide him with a significant reward. In the case of Caesars, that means a public company open for others to play along with him.
