Pansy Ho has resigned from the board of MGM Macau

Macau Business reported on February 28th that Pansy Ho stepped down at the end of last year from the board of directors of the casino company, MGM Macau, that she and MGM Resorts International jointly control.  MB’s source is a Wall Street Journal article that says the Macau casino regulator confirmed the move.

Why do this?

As I posted on February 1st, Stanley Ho appears to have transferred his controlling interest in the largest casino operation by revenue in Macau, Sociedade de Jogos de Macau (SJM  HK:0880), to a number of relatives, including his daughter, Pansy Ho.  I say “appears” because Mr. Ho has since denied doing so more than once, and–depending on the day–is suing to have the interest returned to him.

The transfer forced Pansy Ho to make a choice, since Macau law bars anyone from having operating control over more than one casino concession.  Although Ms. Ho herself hasn’t said, as far as I’m aware, why she left the MGM Macau board, the move suggests she is going to try to recast herself as a passive investor in MGM Macau.  That way she may be able to keep her ownership interest in the venture (maybe as a safety net) while she actively engages in an intra-family struggle for operating control of the much larger SJM.

The association between MGM and Pansy Ho is a controversial one.  The joint venture was the price MGM had to pay to get a seat at the lucrative Macau table.  The Nevada casino regulators decided, after extensive hearings, that Ms. Ho was a suitable business partner for a casino operating in that state.  But the New Jersey Casino Control Commission, considered the gold standard for regulatory compliance, decided otherwise last year.  It ruled that Ms. Ho was more or less an extension of her father, Stanley, whose ties to Chinese organized crime made him (and, therefore, her) “unsuitable” to hold a casino license in New Jersey.

The NJCCC gave MGM two options:  sever ties with Ms. Ho, or sell its casino interests in the Garden State and leave.  MGM chose the latter course, even though declaring oneself a forced seller isn’t a move calculated to get a good price for your assets.

To my mind, and based on the New Jersey finding, the association with Ms. Ho tarnishes MGM’s otherwise good reputation.  Certainly, in my opinion, there will be some American investors who won’t hold the stock because of this.  It may well be harder to get seasoned international casino professionals to work for MGM Macau, as well.

In Hong Kong and Macau, on the other hand, the Ho name isn’t a minus.  It may, in fact, be a plus.  Last summer, both LVS and WYNN voiced their opinion during earnings conference calls that they thought an unnamed competitor was preparing for an IPO.  Since all the other competitors are listed, I presumed the company referred to was MGM Macau.  If so, the departure of Ms. Ho is probably a negative.  And if she had any influence in getting high roller business to come to MGM Macau, one has to ask where she will steer these customers now. My answer:  to SJM.

In the long run, MGM may have a chance to buy Pansy Ho out.  It may be that if she gains control of SJM, the Macau government will require that she divest the interest.  That would be a good thing for MGM, in my view.  But I don’t think that’s likely until the Ho succession is settled.  And that may take a long time.  In the meanwhile, it seems to me MGM Macau has the worst of all possible worlds.

February reached an all-time high in revenue for the Macau gaming market

The previous record, 18.883 billion patacas (one pataca is roughly equal in value to one HK$), came last December.  February got off to a slow start, but that was more than offset by an extremely successfully New Year holiday period.  Overall, the month showed a 40% year on year gain.  The market shows no signs of a slowdown in growth, despite ongoing efforts by Beijing to cool off the mainland economy and an almost 60% expansion of revenue last year.

The following table comes from the Macau Gaming Inspection and Coordination Bureau: