IAC Considering Boosting Stake in MGM Resorts International to Lead the Online Gambling Market

Image: MGM Grand Las Vegas

Barry Diller, Chairman of IAC, has indicated that his company may consider increasing its significant stake in MGM Resorts International (NYSE: MGM). This announcement was made during the company’s fourth-quarter earnings conference call on Wednesday, marking Diller’s return as CEO of the conglomerate. Both Diller and the former CEO, Joey Levin, serve on MGM’s board of directors.

Strong Financial Performance Fuels Optimism

The positive outlook for MGM is supported by recent financial results. MGM shares experienced a notable surge of 10.13% in after-hours trading following the company’s announcement of exceeding Wall Street’s expectations for both earnings per share and sales in the final three months of 2024. This strong performance is largely attributed to the anticipated profitability of BetMGM this year, MGM’s online and digital gambling arm. Furthermore, management reports indicate robust demand for entertainment and hospitality at MGM’s Las Vegas Strip and regional casino hotels as the year begins.

IAC’s Growing Influence in MGM

IAC significantly increased its position in MGM in 2020 and 2021, acquiring a substantial $2 billion worth of MGM shares. Today, IAC holds approximately 22% of MGM’s outstanding equity, making it the largest shareholder. This increased ownership is partly due to MGM’s consistent stock buyback program, which reduces the total number of shares available. In the fourth quarter of 2024 alone, MGM repurchased three million shares, bringing their total buyback activity for the year to $1.3 billion.

In a recent conversation with analysts, Barry Diller likened MGM stock to a Patek Philippe watch, emphasizing its value as a “forever asset.” He explicitly stated the possibility of IAC further increasing its stake in the company, viewing the current share price as “wildly undervalued.” Prior to the recent market jump, MGM shares had gained 6.81% over the past month, outperforming their performance in the previous year.

Strategic Investment Considerations

While IAC has been involved in various recent mergers and acquisitions discussions within the nongaming sector, Diller stated that the company is currently “not anxious to invest but is looking for good ideas.” A notable example of IAC’s strategic involvement in MGM’s financial history was their willingness to finance a portion of MGM’s acquisition of Entain Plc (OTC: GMVHY), the parent company of BetMGM, four years ago. Although neither company has publicly confirmed any current plans for a potential acquisition between MGM and Entain, the speculation continues.

BetMGM’s Profitability and Market Demand

The projected profitability of BetMGM is a key driver of optimism surrounding MGM Resorts International. The online gambling sector has seen significant growth in recent years, and BetMGM is a major player in this market. Strong demand for MGM’s offerings across its various properties, including its renowned hotels, casinos, and entertainment venues, further reinforces the positive outlook. This strong performance positions MGM favorably within the competitive Las Vegas and regional casino markets.

Key Facts about MGM Resorts International:

• MGM is the largest casino operator on the Las Vegas Strip.
• BetMGM is projected to be profitable in 2025.
• In 2024, MGM has repurchased $1.3 billion worth of its own shares.
• IAC currently owns approximately 22% of MGM’s outstanding equity.

Conclusion

Barry Diller’s comments suggest that IAC is seriously considering increasing its stake in MGM Resorts International, driven by the company’s strong financial performance, particularly the anticipated profitability of BetMGM and overall robust market demand. IAC’s significant existing ownership positions them well to capitalize on potential future opportunities. The speculation around a possible acquisition between MGM and Entain remains, but Diller’s bullish outlook on MGM stock indicates confidence in its long-term value. This development underscores the continued strategic importance of MGM within the gaming industry and highlights IAC’s role as a major player in the company’s financial landscape.

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