InterActiveCorp (IAC), helmed by veteran businessman Barry Diller, weathered a period of financial mismatch as its fourth-quarter revenue fell short of Wall Street projections. Yet, in a dramatic twist of fortunes, IAC’s stock sparked a robust rally on Wednesday. The unexpected ascendancy in stock value can be partly attributed to IAC’s significant investment in casino juggernaut MGM Resorts International.
Beneath the rally’s surface lies a tale of mixed performance: regional casino revenues dwindled, overshadowing the stupendous earnings from MGM’s glittering Las Vegas and Macau establishments. The shifting investor focus caused a peculiar divergence — IAC’s shares surged as MGM’s dipped.
IAC’s Chief Executive Officer, Joey Levin, penned an optimistic letter to shareholders, astutely observing the company’s triumph in harnessing the travel and leisure sector’s explosive growth. The culmination of rising social media engagement has amplified the allure of novel experiences, fueling the travel industry’s growth and intensifying the collective ‘fear of missing out’ among consumers.
The foresight of IAC in August 2020, marked by a strategic $1 billion investment into MGM’s equity, placed Diller and Levin on MGM’s board of directors. This calculated move came as the global pandemic beset the gaming company’s stocks, a bold decision that has since proven its merit.
The investment trajectory began with an initial stock purchase at a mere $12.17 per share, followed by an additional billion-dollar surge, riding the wave of MGM’s recovery. And despite a minor setback with a nearly 6% stock decrease, IAC’s bet has paid off substantially, with MGM stock values multiplying by 3.5 since the initial investment.
Mid-2022 recorded IAC holding a 15% stake in MGM, a figure that ballooned to nearly 20% by year’s end. The ongoing share buyback strategy employed by MGM only stands to increase IAC’s share percentage, cementing the investment’s value.
Levin remains bullish on MGM’s trajectory, envisioning an ecosystem evolving from tangible goods to experiential services. He highlights MGM’s dominance in Las Vegas, which, over a vibrant weekend, reinforced its status as the heartbeat of global sports and entertainment. MGM’s establishments serve as grand stages for the world’s most illustrious events, contributing to the city’s allure and the company’s growing profitability.
Tying back to IAC, Levin argued that its market capitalization barely scratches the surface, signaling that current stock prices only reflect the company’s cash reserves and investments in MGM and car rental firm Turo. This suggests an undervaluation of IAC’s assets, implying that investing now is a proposition where stakes in businesses like Angi and Dotdash Meredith come with no additional cost.
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