Translating Corporate Speak: Wynn [Unforeseen Upside Edition #2]

by Mr Juggles

In February, we pointed out Steve Wynn’s colorful and frank commentary on his company’s quarterly call. Today, we follow up with more from the CEO of Wynn (Nadaq: WYNN).

First, if you recall, Wynn issued $660mm of shares at $154 at the end of September after his stock had doubled in 6 months. Explaining his reasoning, he said at the time:
“No company gets to be worth twice as much in 60 days as it was before to any intelligent person, so when that happens, we take advantage of it.”

Smart. Now, one quarter later Wynn has repurchased 2.4 million shares. As he said on this quarter’s call:

“Look, we issued 4.4 million shares for 660 million and promptly distributed it, which was really nice for us shareholders. And a return of capital. We have now bought back at 50 or $60 a share [cheaper] those shares that we issued.”

Translation: You were idiots to buy my shares at $154. But I appreciate you selling them back to me at $95. Thank you.

Additionally, while most companies talk up their own business and exaggerate the prospects and profitability of the business, Wynn opts for honesty.

We report and talk about these EBITDA numbers with our chest puffed out as far as we can get it as an industry. I suppose it tells you how much money you can afford to pay in interest. But the public needs to understand that the profitability, the real profitability of these businesses are much, much less than these puffy EBITDA numbers. Interest expense is very large. And depreciation, I know office building guys and shopping center guys and apartment guys, they get to spend part of the depreciation. But, believe me, in my 40-year history and in the history of every other gaming company here, Kerkorian would agree with me. We spend depreciation. It is a real expense. And when you take the profitability of a hotel like the Venetian or Wynn or Bellagio or any of us it’s a much smaller number when you subtract depreciation and interest. And amortization. We have to pay back the people who lend us the money eventually. It’s a much smaller number. But I know the Wall Street folks, you all like to talk about EBITDA.

Translation: I don’t understand why you think my capital intensive company should be valued on metrics that exclude any measurement of capital intensity. I would use a different approach than you muppets, but then again, your approach is lining my pocket and I will restrict letting you know this explicitly such that no one will pick up on it except those who can parse my words with some kind of proprietary translation algorithm for corporate speak.

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  1. Juan
    May 5th, 2008 | 10:24 am

    Certified badass.

  2. Jr.
    May 5th, 2008 | 11:10 am

    Wow…he shorted The Market and laughed all the way to the bank. Ca nwe nominate him for Fed Chief?

  3. Johnny Get Paid
    May 5th, 2008 | 11:57 am

    Translation: “I’m not only a client, I’m the Playa President.” – Steve Wynn

  4. Size
    May 5th, 2008 | 7:06 pm

    I think I’m in love. If I had known about this guy, I would have been a gaming analyst back in my analyst days.

  5. anonymous
    May 6th, 2008 | 1:03 am

    that’s definitely a baller move – you guys realize what he did right? He basically shorted his own company’s stock, and then he told the market that he had done so, and then he closed his position and paid a huge dividend. I wish I had seen that statement he issued about no company doubling in value in 6 months… I would have shorted the shit out of that shit.

  6. Jeff
    May 6th, 2008 | 11:42 am

    yeah dude, we realize what he did.

  7. Jeremy
    May 6th, 2008 | 7:54 pm

    Best post ever.

  8. May 7th, 2008 | 4:50 pm

    If we use the Steven Wynn approach to investing, a number of stocks with recent advances come to mind, GA, for example, I’m sure we could come up with some others as well…

  9. May 9th, 2008 | 8:38 am

    He got away with shorting his company’s stock this time. He certainly took a short-term view of a long-term game.

  10. Jeremy
    May 9th, 2008 | 3:59 pm

    He didn’t short the stock. He raised money at extremely attractive terms. When the stock went down 50% he made an attractive investment. If the stock wouldn’t have gone down 50% he could have made other investments such as paying down debt. At the price he issued equity at it was probably cheaper than his cost of debt.

  11. May 10th, 2008 | 8:37 pm

    Thanks for the clarification. I meant to say it was as if he shorted his company’s shares. The capital issue was indeed well priced and well timed. Buying back the shares at well below the issue price was an attractive investment. But I can imagine it has left a bitter taste in the mouths of investors who bought the share at issue price.

  12. David
    May 10th, 2008 | 9:51 pm

    I think that you mis-wrote something, Corinne. Here’s the amended version:

    But I can imagine it has left a bitter taste in the mouths of the idiots who bought the share at issue price.

    The winners all grin and the losers say… “Deal the cards again.”

  13. swmod52
    May 13th, 2008 | 2:08 pm

    Everybody talks about stock buy backs as though it is always a great thing but the law of profitablity never changes. Buy low and sell high. Wynn understands it. All these financial cos selling out after there stocks are in the tank don’t.