Lee: Full House “on a reckless buying binge”
A group of minority shareholders in Full House Resorts is trying to overthrow the Las Vegas company’s current board of directors. Las Vegas-based Full House says it is considering “strategic alternatives” for the company, including merging or selling it to a rival, reports the Cincinnati Enquirer.
The investors, led by former Pinnacle Entertainment CEO Dan Lee, informed the Securities and Exchange Commission that the company “has failed stockholders” and needs an overhaul from the top down, including its board members and managers, according to the Las Vegas Review-Journal. The group, which owns 6.2 percent of the company’s outstanding shares, said in a statement it wants to elect five new members to the company’s board.??
“The company has gone on a reckless buying binge, overpaying for three shrinking casinos and pursuing two hotel additions that have marginal returns,” said Lee, who is also a former Wall Street analyst and CFO of Steve Wynn’s Mirage Resorts.
In the SEC filing, the shareholders detailed covenant defaults that led to a loan modification at a higher interest rate, the Review-Journal reported. When the company tried to buy a Tunica, Mississippi casino earlier this year, it forfeited more than 97 percent of a $1.75 million escrow account and spent $300,000 in fees associated with the transaction. And in a letter to Full House shareholders, the group said Full House share values fell almost 59 percent between September 2013 and September 2014.
They also criticized the leadership of Full House Chairman and CEO Andre Hilliou and the compensation paid to management. Hilliou’s compensation has doubled in five years and COO Mark Miller has seen his compensation grow 78 percent.??
“We are not completely surprised for investors to be taking more of an activist role,” said Macquarie Securities gaming analyst Chad Beynon. Beynon said shareholders questioned the company’s purchase of an Indiana casino for $43 million in April 2001. In the past 12 months, the casino has generated just $2 million in cash flow. According to Full House’s second-quarter earnings statement, the company lost $8.5 million in the three-month period that ended June 30.??
Lee says the company needs more experience and autonomy on the board. “It is hard to imagine a more irresponsible stewardship of shareholder money than we have seen at Full House Resorts,” Lee said. “Shareholders could lose more or all of their investment if the company continues on its recent course.”??
Full House has called the proxy fight “inappropriate and disruptive.” The company said in a statement it was exploring options, such as “potential merger or sale of the company” and asked its shareholders to not take any actions on the proxy filing.??
Lee’s group needs 40 percent approval from shareholders to schedule a vote on the matter.
