MGM volatility: Shares up on Friday, down on Monday

Aug 26, 2008 7:03 PM

Industry Insider by Ray Poirier | MGM MIRAGE Inc. (MGM) investors have a right to some indigestion after the roller-coaster ride they took on two days of trading, Friday and Monday.

On Friday, following the announcement that New Jersey gaming regulators had approved Dubai World to acquire up to 20% of MGM, from its current position of 9.4%, shares of MGM shot up $5.52 to close at $33.25 each.

But, on Monday, after negative comments from two analysts, as well as the effects of a declining market, based on widely-watched indexes, the MGM shares price fell $3.53 to close at $29.72.

The first questionable comments involving MGM MIRAGE came from Jeffrey Logsdon of BMO Capital Markets. He said he does not expect Dubai World to invest further in MGM until the $3 billion financing needed for CityCenter is achieved, unless the increased investment is part of CityCenter financing.

Dubai World already has a 50% position in CityCenter, in addition to its stake in MGM shares.

Later, David Katz, gaming analyst for Oppenheimer & Co., noted that he questions the value CityCenter will have for MGM MIRAGE.

"Although the property should set a new standard in Las Vegas and become the next "must see" on the Strip, the likelihood of cannibalizing the other high end properties in the MGM portfolio, particularly Bellagio, appears highly likely," he said.

Katz also noted that MGM MIRAGE would obviously take whatever action is necessary to reduce the impact of cannibalization.

At the close of trading on Monday, MGM shares were listed at $30.23, down $3.02 for the day.

The falling market and continued concerns over high gas prices hit the share prices of other major gaming companies on Monday.

Those showing declines included: Wynn Resorts Ltd. (WYNN), down $3.84 at $91.80; Boyd Gaming Corp. (BYD), down $0.56 at $11.33; Pinnacle Entertainment Inc. (PNK), down $0.68 at $10.19 and Penn National Gaming Inc. (PENN), down $1.37 at $32.03.