Weekend headlines in news outlets like the New York Times and the Huffington Post indicated that gaming giant Las Vegas Sands (LVS, quote) had admitted to graft in its most recent 10-k disclosure. The gambling firm has fired back, denying the allegations. This begs the question: should traders and investors treat this development?
The Sands Macau
Delving deeper into the claims made by the New York Times, it becomes apparent that the conclusions reached by the newspaper are a bit of a stretch. What outlets claim as a tacit admission of bribery is little more than a violation that could range from “a single transaction recorded incorrectly to other errors in the accounting records.”
In other words, while Las Vegas Sands may indeed have violated the Foreign Corrupt Practices Act, it is not necessarily the smoking gun that other news outlets have made it out to be.
A discerning, if somewhat cynical point of view is that company’s like the Huffington Post are guilty of hyperbole in order to generate pageviews. For better or worse Las Vegas Sands’ CEO, Sheldon Adelson has become a polarizing figure in the American political landscape as a result of his substantial political donations to Republican candidates. Consequently, Adelson is a revered figure on the right, and a reviled figure on the left. It would be hardly surprising that left-leaning blogs like the Huffington Post would indulge in some exaggeration to produce more clicks.
While it appears that these allegations are a bit embellished, savvy investors evaluate all possible outcomes.
If Las Vegas Sands were to be found guilty of bribery under the Foreign Corrupt Practices Act, a realistic worst-case scenario would be a substantial fine. Given that the current administration levied fines of around $1.9 billion for HSBC’s role in laundering money for Mexican drug cartels and other nefarious operatives, it’s unlikely that any penalty against Las Vegas Sands would be larger than that against HSBC. Although investors would ideally not like to see the company lose a billion from its balance sheet, the operations of the company itself would unlikely be materially affected going forward as the result of bribery charges.
Any substantial drop – such as down to the low 40’s or high 30’s – in Las Vegas Sands could be considered a buying opportunity for short-to-medium-term traders and investors. The company has traded consistently between the low 40’s and high 50’s for the past two years, and a drop to the low 40’s would offer investors a compelling valuation for this growth stock.