Investors ask where Adelson’s focus is
A few days after Las Vegas Sands Corp. disappointed investors with quarterly earnings declines that sent the company’s share price tumbling and had analysts breaking out in a cold sweat, Chairman and CEO Sheldon Adelson jetted to Israel to watch presumptive Republican presidential nominee Mitt Romney deliver a speech in Jerusalem.
“It was a great speech. Loved it,” Adelson told Bloomberg News.
In Israel, he was treated like a rock star. Adelson, 78, was swarmed by Israeli citizens, Romney donors, and the press as he slowly made his way to his wheelchair after the speech.
Back in the U.S., Argus Research downgraded its view of Las Vegas Sands stock. The firm placed a Hold recommendation on the shares, a change from its previous Buy rating.
The weaker outlook reflected Argus’ concerns that revenues and profits from Las Vegas Sands’ four Macau casino developments were in trouble. During the quarter, net income from Macau declined 40 percent. Argus said the Chinese economy seems to be slowing. Also, results from the first phase of the company’s $4.4 billion Sands Cotai Central were lower than expected.
In Singapore, increased government regulation may be softening financial results from Marina Bay Sands, where second quarter revenues declined 5.8 percent.
Back in Israel, Adelson helped Romney take in more than $1 million at a fundraiser. He and his wife, Dr. Miriam Adelson, were seated at the head table, next to the candidate.
Adelson has donated more than $30 million this year to benefit Republicans. Recently, the couple gave $10 million to an outside super-PAC supporting Romney. Adelson has vowed to put up $100 million to defeat President Barack Obama.
The Boston-born billionaire and his Israeli wife also cut a high profile in Israeli politics. Five years ago Adelson started and continues to bankroll Israel Today, now the country’s highest-circulation newspaper. Both Adelson and his free-distribution daily solidly back Prime Minister Benjamin Netanyahu.
Analysts openly wonder if Adelson, Las Vegas Sands’ controlling stockholder with 57 percent of the outstanding shares, is being distracted from the casino operations by his bi-continental political endeavors.
“With shares falling will Sheldon open his wallet for (Las Vegas Sands) or the GOP?” Stifel Nicolaus Capital Markets gaming analyst Steve Wieczynski asked at the top of a critical July 26 research report discussing the company’s quarterly results.
Shares of Las Vegas Sands hit a four-year high of $62.09 on April 12. Since then, the company’s stock has fallen to levels not seen since October 2010. On Friday, the company’s shares closed at $38.75 on the New York Stock Exchange, down almost 38 percent over the past 16 weeks.
Regardless of Adelson’s politics, the investment community has other concerns.
Las Vegas Sands blamed unspecified elevated legal expenses for a 34.6 percent decline in profits and a 35.6 percent drop in earnings per share in the second quarter.
The company lumped legal costs into its $58.6 million in corporate expenses, but did not break out the amount or say the reason for the bills.
Former Sands China Ltd. executive Steven Jacobs’ wrongful termination lawsuit in Clark County District Court against Las Vegas Sands is clearly racking up billable hours. Last month, Las Vegas Sands lawyers filed court documents to blast holes in claims made by Jacobs that Adelson personally approved of prostitution at the company’s Macau casinos. They were also busy sending threatening letters to the Democratic Congressional Campaign Committee, which accused Romney and his party of financing their presidential campaign on the backs of Chinese prostitutes.
On Thursday the DCCC surrendered unconditionally, saying its statements were “untrue and unfair and we retract them.”
Other allegations in the Jacobs lawsuit linger. His contention that the company unduly influenced Chinese officials prompted the U.S. Department of Justice and the Securities and Exchange Commission to open investigations of Las Vegas Sands a year ago for possible violations of the Foreign Corrupt Practices Act.
The legal matters gained national attention. Last month, ProPublica and PBS’s Frontline jointly produced a lengthy report on Adelson, much of it airing – but not proving - allegations made by Jacobs and issues that are part of the SEC and Justice Department probes.
So what does this mean for investors in Las Vegas Sands? The shares need some type of booster shot – such as better results from Macau or the company landing a new investment opportunity. Several analysts said the share price could languish for another 100 days – until the presidential election is decided.
Las Vegas Sands has 822.74 million outstanding shares. Through various investment funds and stock speculators, it’s assumed some of the shares are owned by Democrats or even Obama supporters. Adelson has never been shy about his political activities or political leanings, so those factors don’t seem to turn off investors.
His emergence onto the national stage brought the attention from dozens of business and political publications, much of it unwanted. Adelson has spoken about his politics in just one forum, Forbes Magazine in February.
Despite his political endeavors, Adelson found time to celebrate the opening of Sands Cotai Central in April and to direct the company’s efforts to expand its business footprint. Las Vegas Sands could announce next month whether Barcelona or Madrid will be home for the planned $22 billion “Eurovegas.”
Adelson, whose net worth of is estimated at $24.9 billion, making him the seventh-richest person in United States, was upset by Las Vegas Sands’ second quarter performance. He said the results “did not meet my expectations.”
Cantor Fitzgerald gaming analyst Robert LaFleur said the “lousy quarter” did not reveal “any major structural cracks in the Las Vegas Sands story.”
For investors, company Chief Financial Officer Kenneth Kay put to rest fears that Las Vegas Sands wouldn’t be able to fund its annual $1 per share dividend program. As of June 30, the company had $3.5 billion in cash on the balance sheet. Kay said the company would spend $850 million through the end of the year on expenses, leaving $2.65 billion to cover dividends.
On a conference call, Adelson admitted he was thinking of ways to boost the company’s shares.
“I’m going to tell you, look at the stock price now,” Adelson said. “It seems to me that it’s one hell of a good reason to take a lot of the money and put it into some buyback.”
Howard Stutz’s Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871.
He blogs at lvrj.com/blogs/stutz.
Follow @howardstutz on Twitter.
