MGM Resorts International MGM
MGM's discredited CEO Murren was just handed a pay-for-showing-up contract; replacing him and unlocking real-estate value via MGM China, CityCenter and Bellagio sales delivers 35%+ upside.
Thesis
Land and Buildings, writing to fellow MGM Resorts shareholders after the G2E gaming conference, argues that Chairman/CEO Jim Murren has lost credibility with investors who openly say 'Jim's gotta go' and that his newly renewed employment contract rewards him for occupancy rather than performance after a decade of ~$10 million annual pay. Founder Jonathan Litt highlights that Murren himself won't buy MGM stock because he lost 90% in the last downturn, undermining confidence in his strategy. The letter lays out multiple paths to a fair value of over $35 per share, or 35%+ upside: replacing Murren, separating MGM China, selling CityCenter and Bellagio/MGM Grand real estate on a tax-efficient basis, reducing parent debt via MGP borrowings, building a Marriott/Hilton-style lodging/gaming brand, and lobbying to modernize gaming REIT legislation.
SCQA
MGM Resorts is a major Las Vegas-centered gaming and lodging operator with related public vehicles in MGM China and MGM Growth Properties REIT, operating in a robust Vegas demand environment highlighted at the recent G2E conference.
Chairman/CEO Jim Murren has materially underperformed peers, won't buy his own stock citing 90% downside, and the Board has just renewed his contract with guaranteed ~$10M/year compensation untied to results.
Replace Murren, unbundle overlapping chair/director roles across MGM China, MGM Resorts and MGP, spin or track MGM China, sell CityCenter and Bellagio/MGM Grand real estate tax-efficiently, cut parent debt, and build a lodging/gaming brand.
Fair value in excess of $35 per share, representing 35%+ upside from current levels, with additional EBITDA multiple expansion once a credible CEO restores market confidence in MGM.
The three reasons
- 1
CEO Murren has lost credibility with shareholders; 'Jim's gotta go' worth multiple EBITDA turns
- 2
New employment contract rewards Murren for staying in the chair, not for performance
- 3
Multiple asset-level paths (MGM China, CityCenter, Bellagio/MGM Grand) unlock 35%+ upside
Primary demands
- Replace Chairman and CEO Jim Murren
- Separate chairman roles across MGM Resorts, MGM China, and MGM Growth Properties and remove overlapping directors
- Liquidate, spin or create a tracking stock of MGM China
- Sell CityCenter on a tax-efficient basis and use proceeds to pay down debt
- Divest real estate of Bellagio and MGM Grand to the highest bidder
- Borrow against MGM Growth Properties REIT, Bellagio and MGM Grand to reduce parent debt
- Build a lodging/gaming operating brand akin to Marriott/Hilton to earn double-digit EBITDA multiples
- Lobby for changes to REIT legislation to allow gaming REITs to own their lessee in a TRS
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Steve Wynn buying Wynn Resorts stock (CEO conviction contrast)
- Matt Maddox at Wynn Resorts and Rob Goldstein at Las Vegas Sands (replacement CEO analogues)
- Marriott and Hilton (lodging brands at double-digit EBITDA multiples)
- Lodging REIT TRS legislation reform (>15 years ago)
Notable slides (2)
Notes
Three-page press release format wrapping a public letter from Jonathan Litt (Founder & CIO, Land and Buildings) to MGM shareholders, dated October 6, 2016. References a prior L&B letter from September 22, 2016 and the campaign site www.RestoreMGM.com — clearly a follow-up salvo in an ongoing campaign against CEO Jim Murren. No stake disclosed. Minimal visual craft (text letter on letterhead). Uses anecdotes from G2E conference ('Jim's gotta go') as rhetorical device and CEO-own-words contradiction (Murren refusing to buy MGM stock).