Most members of the AGEM Index witnessed their stock prices decline throughout the month of November 2011 on speculation of another economic downturn as signs of a credit crunch surrounding the Eurozone debt crisis were being reported. Much of this fear was alleviated in the last few days of trading in November due to action taken by major central banks. Early forecasts on holiday retail sales also reflected promising signs that consumer spending is expected to grow, and recent jobs reports were also brighter than they had been. All three major stock indices closed up more than 4 percent on the last day of trading in November, and the Dow Jones Industrial Average gained 490 points, its largest percentage gain since March 2009. Modest improvements in the labor force continue to bring optimism to the market, even as it remains highly volatile.
Although the broader equities markets rebounded in the final trading days, the AGEM Index did not gain enough ground to end the month in positive territory. With a composite score of 115.84, the index of 16 global gaming suppliers declined by 7.96 points during the month of November, down 6.4 percent from the prior month. The index overall remains up 9.8 percent for the year and half of the index members are reporting stock prices ahead of the same period a year ago.
Selected positive contributors to the index during the month included the following:
• Global Cash Access (GCA) contributed 1.14 points to the index, sourced to a 51.01-percent gain in its stock valuation.
• Shuffle Master (SHFL) reported a 4.52-percent increase in its stock price, contributing 0.21 points to the overall index.
Selected negative contributors to the index included:
• Lottomatica (LTO) posted a decline of 17.47 percent in its stock price, removing 4.44 points from the index.
• Konami (KNM) contributed negative 2.85 points to the index, sourced to an 8.9-percent fall in its stock valuation.
The Chicago Board Options Exchange Market Volatility Index (VIX) closed above 30 in all but three days during the month of November. This measurement of implied volatility of S&P 500 index options suggests swings are likely to continue in the near-term. Although financial uncertainty lingers over the Eurozone and central banks around the world, legislation in Boston confirmed the authorization of casino gaming entering the state.
Stemming from the passage of House Bill 3807, Massachusetts Gov. Deval Patrick signed legislation on Nov. 22, expanding gaming in the state. The law allows one resort-style casino in each of three regions including: greater Boston, western Massachusetts and the south coast. One additional slot parlor (up to 1,250 gaming machines) can be located anywhere in the state. Many expect this slot parlor will be developed with an existing horseracing facility.
Before much of what is contained in the 168-page bill can move forward, three commissioners must be appointed, one from the governor, the attorney general and the state treasurer. Two additional commissioners will be voted in by a majority vote of the first three appointees. The future of Massachusetts gaming will be shaped by this first gaming commission. Nevertheless, casino operators are already strategizing their next move to gain one of the three coveted gaming licenses, each requiring $500 million in capital investment, and an initial license fee of at least $85 million.
Only a week before the gambling bill was signed into law, Ameristar Casinos agreed to purchase a currently vacant 41-acre industrial site near the city of Springfield in the western portion of the state. Caesars Entertainment also made a preemptive strike in April by forming an alliance with the Suffolk Downs Racetrack in east Boston.
Hard Rock International could also be a potential competitor seeking the western license, as it is working on a partnership with a local developer in the city of Holyoke. It is expected that competition for the western license will be fierce, with Ameristar and Hard Rock being only two noted players publicly moving forward with a planned site at this time. The Mohegan Sun tribe, which operates a casino in neighboring Connecticut, and Penn National Gaming, are also rumored to be pursuing a site in the region. However, regional casino operators are not the only ones vying for a license. Las Vegas Sands CEO Sheldon Adelson is a native to Massachusetts and has expressed interest in one of the licenses. Lastly, Steve Wynn has already begun meeting with The Kraft Group to potentially develop a casino near Gillette Stadium, home of the New England Patriots. No matter the outcome of the licensees, Massachusetts, gaming operators and suppliers are likely to benefit from the recent legislative move.