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Why is Wynn Selling?


It is clear that because of the company's significant investment in Macau, WYNN is yet another proxy for the China boom trade.

Below is a missive from Minyan Peter, who has become quite popular around the 'Ville with readers and professors alike with pieces like A Bird's-Eye View of the Credit Conundrum and Brave New World for Debt Issuers.

Late last Thursday, Wynn Resorts (WYNN) sold 3.75 mln shares. With the over-allotment exercised, WYNN will net just over $700 mln in proceeds. Per its press release, the use of proceeds is general corporate purposes and to enhance financial flexibility for future projects and potential new developments.

As I have written before, there are only two times you issue (debt or equity) securities: a) when you absolutely have to or b) when you are stupid not to. Judging by WYNN's stock performance (up almost 100% since mid-July) as well as the use of proceeds, I would have to put this transaction in the latter category.

Like Sam Zell in real estate or Steve Schwartzmann in private equity, I believe Steve Wynn represents best in class for his industry. And when I see people like him selling I sit up and ask why.

Looking at research reports on WYNN, it is clear that because of the company's significant investment in Macau, WYNN is yet another proxy for the China boom trade. And when you plot WYNN's performance against FXI, the relationship becomes even more transparent.

Click here to enlarge.

Conventional wisdom states that the Chinese stock market will not peak until after the 2008 Olympic games. And up until last Thursday I bought into that.

But as they also say in Las Vegas and Macau, you don't bet against the house – especially when the house is Steve Wynn.

Admittedly, I am just a banking person, but it does make you wonder.
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