A Gamble For Steve Wynn

12.10.2009, Why the casino tycoon's Oct. 9 Hong Kong IPO isn't a sure bet.

HONG KONG -- Full of vacant rooms, empty convention halls and sparsely played tables, Las Vegas is not weathering the recession as well as casino tycoons would like. So American billionaire Steve Wynn is betting that Chinese gamblers will fill his casino in Macau and, more importantly, that Chinese investors will help him raise some much-needed cash.

But the gamble he and Las Vegas Sands ( LVS - news - people ) chief Sheldon Adelson are making by going public with their Macau properties on the Hong Kong stock exchange is anything but a sure bet. Oct. 9 marks the first day of trading for Wynn Macau, and what happens to the stock price will reveal just how confident traders are about the prospects of an economic recovery.

Wynn's IPO comes at a time when Hong Kong's investors appear to have grown weary of so many new listings in such a short time. Ten IPOs in the past three weeks have mostly evoked a tepid response from traders as five of them fell below their debut price and only one finished unchanged. The two biggest losses came from Glorious Properties, which fell 14.6% last Friday, and Metallurgical Corp of China, which lost 11.7% a week earlier.

On Thursday, however, investors appeared to have recovered some of their appetite for IPOs when Ausnutria Dairy Corp. jumped over 20% in early trading. China Vanadium, Titano- Magnetite Mining and Yingde Gases also made their debuts Thursday.

Despite concerns that Wynn's shares were overpriced at $1.29 apiece, the offer was oversubscribed. About $250 million of the $1.6 billion worth of shares on offer were snapped up by several Asian billionaires plus a fund management company. Wynn Macau holds a 25% stake in the Wynn's Macau business. It's been a tough year for Wynn, who with a net worth of $2.3 billion ranks 141st on Forbes' list of the 400 richest Americans and 468th on Forbes'list of the world's billionaires. Shares of Wynn Resorts, which is traded in the U.S. on the Nasdaq, fell 80% between last August and March -- when casino stocks across the board hit lows -- as gamblers stayed home in America and Asia.

Meanwhile, in August, Wynn sold $100 million worth of his shares in Wynn Resorts, planning to put the proceeds toward a divorce settlement for his wife Elaine. The majority of the proceeds from the Hong Kong IPO won't go toward the China branch of the business, rather, it will be redirected for use in other parts of Wynn's company. In an attempt to avoid layoffs, Wynn has slashed pay, hours and bonuses for his Las Vegas employees.

A weak performance by Wynn would certainly not augur well for rival Adelson, who also hopes to raise $1.5 to $2 billion by listing the Macau unit of his casino operations. Hong Kong's IPO market slowed to a trickle over the past year as the Hang Seng index fell along with rest of the world's financial markets. But China's robust economic recovery took hold and has been fueling the Hang Seng index's climb to its current level of 21,323 from a low of 11,344 in early March.

While casino stocks have risen since March lows, some of the gambling tycoons' success in Asia is directly related to loosened restrictions by the Chinese government on how many times a year mainland tourists can visit Macau. Another move that could boost profitability is the possibility of a cap on commissions that casinos must pay the workers who lure in high rollers.

Macau casinos returned to positive growth this summer, and September figures showed gaming was up 53%. "While 2008 was a challenging year for gaming operators saddled with credit, bankruptcy and policy woes, we are seeing signs of improvement," a May 2009 CLSA report said. "We believe that gaming firms have emerged from the woods in terms of capital structure issues which have plagued the sector since the credit crisis erupted."

It's not that Macau's future looks bleak. It's that Wynn's shares might be overpriced and investors, judging from their behavior over the last month, might be sick of dropping money on shares that eke out gains rather than skyrocket.

Thomson Financial contributed to this report. Forbes.com

Über Glücksspiele in Macau - Gambling in Macao:

Macau (englisch Macao) liegt rund 50 Kilometer westlich von Hongkong und ist das Glücksspiel-Paradies in Asien.

Macau hat rund 40 Spielcasinos. Die grössten Casinos sind The Venetian Macao, MGM Macao, Wynn Macao, Galaxy StarWorld, City of Dreams, Sands Macao, Casino Lisboa.

Neben den riesigen und farbenfrohen Casinobuildings ist eines der Wahrzeichen der Macau Tower (Fernsehturm mit 338 Meter) mit atemberaubenden Ausblicken auf die Stadt.

Macau erstreckt sich über eine Fläche von 115.3 km2 und hat rund 620'000 Einwohner.

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