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This is Why Wynn Resorts (WYNN) Stock Fell Today

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On Friday, shares of hotel and casino operator Wynn Resorts Ltd. (WYNN - Free Report) closed the day down 3.38% to $130.42 per share after one of Macau’s top prosecutor was found guilty of corruption, a sign of the Chinese government’s continued offensive on the region’s gambling district.

The prosecutor, Ho Chio Meng, was sentenced to 21 years in jail after he was found guilty for illegally awarding almost 2,000 public contracts that benefited him and his family, in addition to other crimes including aggravated fraud, money laundering, and initiating or founding a criminal association.

Wynn also was hit today after Daiwa analyst Jamie Soo said that one of Macau’s largest junket operators is apparently concerned about liquidity. In a note to clients, Soo wrote that the operator sent a memo to customers and staff that warned of “heightened enforcement” in relation to anti-money laundering initiatives. Wynn and its casino peers may come under pressure.

"Our view of expected further heightening of enforcement continues to be reaffirmed given the events we have witnessed over the past six months. Such measures also appear to be incrementally more sweeping, and may very well have a progressive negative impact on the VIP segment in the foreseeable future. The premium mass segment may also be affected as patrons of this segment had also traditionally relied on junket-affiliated liquidity channels,” wrote Soo.

Macau’s junket operators work with casinos like Wynn to bring in VIP gamers; they reach out to wealthy gamblers directly, bringing them to Macau by offering travel and accommodation promotions, for instance. However, junkets have been a large focus of China’s Macau crackdown that initially began back in 2014. President Xi Jinping promised to “clean up” the region, which is the only place in China where gambling is legal.

Today’s news affected other casino stocks. Las Vegas Sands (LVS - Free Report) closed the day down 1.77%, while Melco Resorts & Entertainment (MLCO - Free Report) was down over 2% at market close.

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