Posted on: February 9, 2021, 09:21h. Last updated on: February 9, 2021, 09:21h. Wynn Resorts (NASDAQ:WYNN) announced Monday it’s selling equity to raise capital, an offering that was increased due to strong demand. One sell-side analyst believes the operator’s emerging interactive/sports betting unit is a likely destination for some of that cash. The sportsbook at the Wynn Las Vegas. The company could use cash from a recent share sale for its sports betting unit. (Image: Las Vegas Review-Journal)On Monday morning, the gaming company said it would sell up to 6.32 million shares, but yesterday afternoon, it was revealed the offering size was upsized to 6.5 million shares. Based on the sale price of $115, the transaction results in $747.5 million of gross proceeds for Wynn.Morgan Stanley analyst Thomas Allen said it’s surprising that the Encore operator would sell shares given that it has $3.5 billion in cash and $500 million in unused credit revolver capacity, but he adds there is sound strategic reasoning for the equity offering.It gives them a little extra liquidity to market their new sportsbook app, and with the equity markets at highs and China being more restrictive on travel, we believe WYNN is choosing to be conservative,” said the analyst in a note to clients.Allen rates Wynn stock “overweight” with a $129 price forecast, implying upside of about 10 percent from the Feb. 8 close.Wynn Inching Into Sports Betting EquationWynn isn’t yet viewed as a sports wagering force on par with BetMGM, DraftKings or FanDuel and some of that is attributable to the company’s under-the-radar approach. For example, WynnBET debuted in New Jersey — the largest sports betting market in the country — last August to little fanfare.Quiet or not, evidence suggests the gaming company is prioritizing its Wynn Interactive unit, which includes iGaming and WynnBET. On a conference call with analysts last week, CEO Matt Maddox said revenue at the online business jumped 50 percent on a quarter-over-quarter basis in the last three months of 2020.Assuming the company allocates some of the cash raised in the equity sale to its sports wagering business, it would be a practical move because that’s hyper-competitive arena in which operators frequently toss around large sums in the name of customer acquisition. WynnBET is doing just that, offering new clients in Michigan a $1,000 risk-free wager if they make an initial deposit of at least the same amount.Strong Track Record, Ambitious PlansWynn has a history of being prudent when it comes to accessing capital markets, notes Morgan Stanley’s Allen.“WYNN has historically been proactive with its capital mgmt, raising money when it sees markets are open rather than risk running into issues down the road, as shown by its four debt raises at similar to historical coupons in 2Q/3Q20,” said the analyst.If the company is going to become a credible threat in online sports betting, cash and proper use of it are essential.WynnBET is currently live in Colorado, Michigan and New Jersey and the operator has market access in Indiana, Iowa and Ohio as well as provisional licensing in Tennessee. It’s also waiting on a decision on permit application in Virginia.Massachusetts approving sports wagering, perhaps this year, would likely be a catalyst for Wynn shares because the company operates Encore Boston Harbor — one of the Bay State’s three casinos.
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