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GAMING SHARES CRISIS
WALL STREET
Casinos travel that winding road…
Sharon Harris looks at how the fate of the gaming industry is affected by
the machinations of Wall Street and financial institutions worldwide…
A
fter decades of financial success and often resulted in guilt by association.”
expansion, the fate of the gaming To offset these conditions that stifled Nevada’s
industry rests not only in the players’ growth and future, lawmakers amended the
hands, but also on the New York stock legislation in 1969. “Regulators realized that public
exchange. Several publicly traded companies could more easily secure capital for
corporations own and operate dozens of casinos, so improvements. Now, licenses were mandated for
Wall Street impacts their survival. The fortunes of shareholders owning more than 10% of the stock. Key
their officers, employees, shareholders and employees and those with management authority,
communities soar and slide with the market. including top executives and board members, had to
Gaming is confronting an unprecedented financial attain a license,” says Fahrenkopf.
emergency, stressing US jurisdictions where the The new law opened the door for an investment
proliferation of gaming has injected economic vitality. onslaught. National chains like Hilton, MGM, Hyatt,
Gaming has supported everything from senior citizen Del Webb, Ramada and Holiday Inn launched
programs to education to payroll and property taxes. operations in Nevada. Private companies like Harrah’s
went public in 1971.
Going from private to public Throughout the 1970s, smaller private companies
understood their limited ability to compete and build
Current conditions are a far cry from the early days large resorts. Their size also impacted their
in Nevada during the 1930s and 1940s. Casinos sprung opportunity to expand into emerging markets.
up in the Las Vegas desert and the valleys in Reno, with However, the pioneer spirit of the Old West motivated
small gambling halls in between. Through the 1970s, entrepreneurs like Sam Boyd to buck the trend and
private Nevada companies operated casinos. develop a new niche as a family-owned company.
The stock market had little appeal since regulations After years of working in small casinos, he founded
created an undesirable economic environment for Boyd Gaming in 1973. Boyd retained that company
public offerings. Frank Fahrenkopf Jr, president and culture up to his death in 1993.
CEO of the American Gaming Association (AGA), Executive Chairman Bill Boyd, the founder’s son,
says, “Prior to Nevada’s 1967 Corporate Gaming Act, says, “In those days, being a smaller, family-owned
every shareholder had to be licensed, and every company allowed us to pursue projects unrealistic for a
owned share required approval, regardless of quantity. public company. Many thought we were crazy to build
No one wanted to undergo scrutiny.” Sam’s Town on an empty stretch of Boulder Highway in
Acquiring investment capital often proved difficult. 1979. As a public company, we might not have built it.
Unfavorable attitudes towards casinos often deterred However, with our family in charge, we developed the
conventional banks from lending money to casinos. property that created the Las Vegas locals market.
As a business, these companies needed capital, and “In those days the owner-customer relationship was
sometimes entered into unsavory alliances in the closer. As a family-operated company, we really
1950s and 1960s. emphasized personal service and our commitment to
Bill Eadington, economics professor and director of the customer. Since our family name was on the line,
the Institute for the Study of Gambling and we wanted customers to enjoy a unique experience.”
Commercial Gaming at the University of Nevada at Whoever operated a property, that philosophy
Reno (UNR), claims outside financing helped casinos dominated Las Vegas. Excluding those venues owned
survive. Describing these convoluted partnerships, he by Howard Hughes, several public and private
says, “The early groups were fringe, or had organizations each operated a few Las Vegas casinos.
questionable ties. In the early 1960s, the Teamsters As many other companies went public in the early
Union accounted for half the capitalization via heavy 1990s, they had early involvement with riverboat,
investments in pension funds. Questionable financing mining town and tribal gaming management.
22 JUNE 2009
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