IAC Becomes Largest Shareholder in MGM, Increasing Stake to 20%

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Stepping up as the undisputed titan at the investors’ table, Barry Diller’s IAC/InterActiveCorp has risen to claim ownership of a full 5th of MGM Resorts International’s shares. The dominant position of IAC solidifies it as the largest investor in the casino behemoth. The company now says its grip on the gaming enterprise forms the largest part of its investment portfolio.

The proclamation came directly from the head of the table, CEO of IAC Joey Levin, in his letter to investors issued Tuesday, running concurrent to the revelation of the firm’s earnings report. Levin spoke not only of the firm’s ownership of the MGM stock but also underscored the fact that MGM remains a fundamentally strong investment asset, even if its robust performance is not mirrored in its current pricing on the stock market.

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With MGM carving an astonishing sum close to $400 million as Free Cash Flow as a result of record-breaking financial and operational achievements in the first quarter, Levin stated candidly, “We are pleased to own over 20% now.”

Perhaps more astounding is a Barron’s report that on its upper hand in MGM, IAC stands an unrealized gain approximated at $163 million. This, despite MGM’s 7.6% decline over the past year and a further 10.2 % downgrade since the year’s commencement.

IAC’s stake in MGM bloomed following its initial investment in August 2020 when it scooped up $1 billion worth of MGM’s shares, an investment fortified by another billion reliably padded on in the following three months. IAC has kept holding to its stake steadily since then, even bolstering it, courtesy of MGM’s successful buyback initiatives.

The fruitful partnership between Diller’s firm and MGM culminated in buying $405 million worth of MGM shares in February 2022. These shares had been put up for sale by Keith Meister’s Corvex Management. IAC has continuously enriched its share percentage aided significantly by MGM’s successful share buyback endeavors. MGM reported last week that it bought back 12 million of its shares in the period spanning January through March. From 2021, MGM has impressively slashed its pool of outstanding shares by a whopping 36%.

Diller’s company first marked its interest in MGM about four years ago, painting a vision of a long-term investment backed by a robust balance sheet, a sterling Las Vegas portfolio, and a foothold in the online gaming sphere. This was somewhat of an unusual move for IAC, a firm not known for taking passive positions on stock in companies. Nevertheless, IAC has stayed true to its investment stance with MGM without causing ripples in the casino operator’s business.

And the fruits of their stealthy strategy are evident. IAC now stands as the largest shareholder in MGM, owning a handsome 10 times more MGM shares than the next in line, Corvex. Moreover, IAC’s share in MGM even surpasses the combined shares held by financial juggernauts Vanguard, BlackRock, and State Street Global Advisors.