MGM Resorts (MGM) Stock Drops 11% Amid Surprise Bid for Barry Diller’s People Inc

Key Takeaways

• Casino giant MGM Resorts is exploring the acquisition of Barry Diller’s People Inc, merely 24 hours after People withdrew its $12.4 billion takeover offer for MGM.
• Diller accumulated approximately 27% of MGM shares starting in 2020, capitalizing on pandemic-driven weakness in casino equities.
• Shares of People Inc surged up to 11% during Friday’s premarket session following the acquisition reports.
• MGM stock plummeted 11% before Friday’s opening bell, reversing earlier gains sparked by initial takeover speculation.
• This development reflects a broader trend of wealthy investors making significant plays on traditional Las Vegas casino properties, exemplified by Tilman Fertitta’s $17.6 billion Caesars acquisition.

MGM Resorts stock has experienced dramatic volatility over recent sessions. The casino giant is now in discussions to acquire Barry Diller’s People Inc, representing a stunning reversal just 24 hours after People abandoned its $12.4 billion pursuit of MGM.

Shares of MGM plunged 11% in premarket trading Friday. The decline wiped out earlier advances triggered by initial reports of Diller’s takeover ambitions.

MGM Resorts International, MGM

People Inc stock experienced the opposite trajectory. Equity jumped as high as 11% before Friday’s market open following news of the potential acquisition.

The Wall Street Journal broke the story that MGM leadership is evaluating an offer for People. Reuters subsequently verified the report through sources with knowledge of the discussions.

Both organizations have remained silent on the matter. MGM ignored requests seeking commentary, while People representatives declined to provide statements.

The Strategic Logic Behind MGM’s Interest

Diller initiated his MGM investment campaign in 2020. The pandemic had devastated casino companies through forced shutdowns and travel disruptions, creating what Diller perceived as a value opportunity.

His position eventually grew to approximately 27% of MGM’s outstanding shares. The current value of this holding approaches the total market value of People itself.

An MGM acquisition of People would essentially function as a substantial share buyback. As a bonus, MGM would inherit People’s collection of media properties.

People, previously operating under the IAC name, controls publications including People magazine, Food & Wine, Southern Living, and the Daily Beast. The organization has been streamlining operations in recent years to concentrate on publishing ventures and its MGM investment.

Renewed Faith in Physical Casino Properties

Diller’s initial investment thesis centered on the belief that MGM’s tangible assets, such as the iconic Bellagio, were trading at discounts in a market fixated on digital platforms. This viewpoint has gained additional adherents.

Restaurant magnate Tilman Fertitta is acquiring Caesars Entertainment in a $17.6 billion transaction. Fertitta also maintains substantial ownership in Wynn Resorts.

These strategic moves indicate that influential investors maintain conviction in the long-term prospects of traditional casino real estate. However, market sentiment remains skeptical, evidenced by MGM’s recent share price deterioration.

MGM’s competitor Bally’s has encountered similar challenges, connected to its ambitious casino construction and expansion initiatives nationwide. The entire sector faces intensifying competition from rapidly growing online sports wagering platforms and prediction markets.

People’s latest quarterly earnings, released last month, demonstrated enhanced profitability within its publishing operations. This achievement came despite headwinds from declining website visits attributed to artificial intelligence-driven transformations in search engine behavior.

Should MGM choose to proceed, a formal acquisition proposal could materialize within days, according to Wall Street Journal sources. Currently, both parties remain in preliminary conversations with no definitive terms established.