There’s little question that 2020 will long be remembered as a year of crisis for the casino industry.
Commercial gaming revenues in the U.S. were down 79 percent during the second quarter when compared to Q2 2019, a fact that made IAC/Interactive’s August announcement that it was purchasing 12 percent of hospitality and gambling giant MGM all the more headline-grabbing.
“We think we found a once-in-a-decade opportunity to find a meaningful position in an iconic brand,” explains IAC/InterActive CFO Glenn Schiffman, who says IAC’s balance sheet remains flush with cash (more than $3 billion) after the recent spinoff of online dating site Match.com.Read More
“We believe that Las Vegas will come roaring back, and this comes back to how IAC likes to invest: We like massive addressable markets with tailwinds from offline to online, and that’s what we see with gaming,” says Schiffman, who is no stranger to industries in crisis. Or so he explained when he joined us for CFO Thought Leader Episode 440.
Back in September of 2008, Schiffman was head of investment banking for Lehman Brothers’ Asia-Pacific business when the firm filed for bankruptcy due to its part in the subprime mortgage crash.
Schiffman, along with other top Lehman partners, helped to manage the sale of Lehman’s Asian business to Nomura Securities.
“In times of crisis, you have to separate the urgent from the important because in a crisis everything appears urgent but not everything is important,” explains Schiffman, who says that he learned just how important being able to separate the two was when the clock was ticking in the wake of the Lehman bankruptcy and his team was seeking a resolution that would best serve Lehman’s Asia workforce.
“We saved every single job in Asia—and that was 3,000 jobs, including my own,” comments Schiffman, who adds that the Lehman bankruptcy, among other things, revealed how during a time of crisis an individual’s character becomes more evident.
“Crisis doesn’t define character, crisis reveals character,” says Schiffman, who, after joining Nomura, went on to help establish and build the bank’s North American investment banking division. –Jack Sweeney
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Guest: Glenn Schiffman
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CFOTL: Tell us about IAC’s recent investment in MGM and its growing interest in the online gaming world.
Schiffman: It’s not just the online piece of MGM that, of course, is exciting to us. But it’s the entire MGM Resorts business, including the offline hotels and casinos.
And maybe, it makes sense to take a step back and talk about that for a second. IAC has always been about rebirth, building, rebuilding. And this year, as I’m sure we’ll talk about, we spun off the Match Group.Read More
And that was a distribution to our shareholders of the 80% interest that we owned in the Match Group. And we effectively distributed $25 billion of value to our shareholders. And so 2020, which is IAC’s 25th year in existence, now, we’re a lot smaller and our opportunity, our challenge, what’s really exciting about where we are right now is, we get to rebuild IAC. And it’s a great new moment. Now, of course, we have $3 billion of cash on the balance sheet. We have a roster of very strong businesses, three of which we just spoke about. So the question is, what do we want IAC to be? And that’s the next journey, if you will?
And we think we found a once in a decade opportunity to take a meaningful position in an iconic brand. Las Vegas, of course, is not going away. Las Vegas, that footprint and the footprint that MGM has in Las Vegas is irreplaceable.
And of course, the pandemic, knock on wood and, we all hope will be behind us. And with a vaccine or obviously, improved therapeutics around it. But once that’s behind us, we believe the Las Vegas will come roaring back. That’s one.
And then two, if you go back to the way IAC likes to invest, massive addressable markets, tailwinds in respect of offline to online conversion, that’s what’s going on, we think, in online gaming. And that’s what’s going on, we think, in sports gaming. And MGM is in, we think, a terrific spot to innovate there, to grow there, and to really penetrate that market. And we think that gaming market is $400 billion, plus or minus. And that’s exciting to us now.