MGM Growth Properties performed exceedingly well during its initial public offering and surpassed top expectations by about per share.
MGM Resorts International set an initial share price of $21 for the initial public offering of its news MGM Growth Properties REIT. Analysts said that share price was on the “high end” of their initial anticipated opening price of $18 to $21 per share.
The shares were to begin trading April 20 on the New York Stock Exchange, under the MGP symbol. MGM plans to sell 50 million shares to raise $1.05 billion.
Financial Times reported MGP shares traded for up to $22.01, after raising the anticipated $1.05 billion on its first day on the exchange. MGP is the second IPO to raise more than $1 billion on its first day this year.
MGM Resorts International told the SEC filings it spun off MGP this year in order to “optimize real estate holdings and establish a growth-oriented public real estate entity.”
The REIT enables MGM it to pay down debts incurred from its many recent developments, while pursuing additional developments.
MGP now owns the Mandalay Bay, The Mirage, Luxor, New York-New York, Excalibur, Monte Carlo, and The Park properties on the Las Vegas Strip, the MGM Grand Detroit, and the Gold Strike Tunica and Beau Rivage casinos in Mississippi.
MGM Resorts International is paying an annual $550 million lease to continue operating the properties, including paying for all maintenance and capital improvements.
MGM Resorts International CEO Jim Murren said all workers at the properties affected will remain MGM Resorts International employees.
In SEC filings, MGM says it will continue to “selectively” choose “entertainment and gaming-related properties” to add to the REIT, which includes the “acquisition of assets that contribute to our tenant and geographic diversification” that “have low operating risks and provide stable cash flows.”
Although MGP is a separate entity, its board is comprised mostly of people with close ties to MGM Resorts International, and some critics say that means MGP is a “controlled” company that isn’t free to unlock its full value.
Other critics say the long-term view for the REIT’s growth is “minimal,” mostly due to its dependency on Las Vegas revenues, and an overinvestment in the Mississippi market.
The Detroit market has improved in recent quarters, but the Mississippi gaming marketing is languishing. And if Las Vegas suffers another downturn, as it did during the Great Recession, MGP would be vulnerable, unless it continues diversifying its regional and other holdings.
While MGP at least temporarily surpassed its share price expectations, Red Rock Resorts is preparing for an IPO that also is valued at up to $21 per share.
Red Rock told the SEC is offering 27.1 million class A shares, at an expected price of $18 to $21. The shares would be traded under the RRR symbol on the Nasdaq, and current shareholders want to sell another 196,000 shares, Red Rock reported.
Red Rock anticipates generating some $500 million from its IPO, and said it would use the money to buy an interest in privately owned entertainment and gaming firm Station Holdco.
Some critics points out that, while Red Rock is selling class A shares, which come with one shareholder vote per share, the Fertitta family owns all class B shares, which have 10 votes per share. That gives the Fertitta family control over any action requiring shareholder approval, and makes Red Rock Resorts a “controlled company,” by its own admission.
The IPO’s leading underwriters are Deutsche Bank Securities, BofA Merrill Lynch, JPMorgan Chase, and Goldman Sachs, Red Rock reported.
Opposing the Red Rocks IPO is the UNITE HERE! labor union, which represents 270,000 workers in North America and wants to organize Red Rock Resorts’ casinos in the Las Vegas area.
