The Month's 144's And Selling Gaming Stocks

First Call/Thomson Financial Insiders' Chronicle, July 23, 2001

According to preliminary figures, insiders and other early investors registered $5.5 billion in stock for sale in June. Not only is this considerably below the nearly $12 billion registered for sale in May, but momentarily at least, we've skirted what would have been an ominous trend. Looks like we've reached another impasse, and will have to sit tight to see how July shapes up.

Ironically, insiders at gaming stocks seem more inclined to tip their hands. And speaking of irony, gambling plays have been among the most consistent on Wall Street over the past 18-or-so months. At least they were until this month's earnings warning from Harrah's (HET) shook out a few weak hands. Meanwhile, we've seen some uncharacteristic insider selling at, among others, Penn National Gaming (PENN) and Argosy Gaming Inc. (AGY).

The negative sentiment most recently spread to two of gaming's success stories, rival slot manufacturers International Game Technology (IGT) and WMS Industries (WMS). Both companies have been stoked by heavy orders from California tribal casinos and the adoption of legalized gambling in a number states. In both cases, however, there are creeping concerns that this type of growth can not continue indefinitely.

IGT has been particularly proactive in addressing such concerns, most notably with the acquisition of Anchor Gaming. And while antitrust issues linger, because Anchor was never really in the game manufacturing business, industry insiders don't expect any problems in getting the deal approved. AU the same, while management publicly basks in the glory of the deal, insiders are cashing out.

All told, from April 24 through June 20, seven insiders sold 955,634 shares at $56.95 to $65.10 per share. President, CEO Thomas Baker, who last sold in '93, ahead of an eighteen-month, 65% decline, sold 200,000 shares. Vice-Chairman Albert Crossor also a seller in '93, sold 202,367 shares, with only his second sale since. A number of the remaining sellers trimmedtheir actionable positions by more than 25%.

The activity may be even more striking at WMS Industries, where from May 1 through June 26, ten insiders sold 344,710 shares at $20.59 to $31.40 per share. Chief Executive Brain Gamache, General Counsel Orrin Edidin and CEO Scott Schwienfurth all reduced their actionable positions by more than half. And while he still maintains a hefty personal stake, Chairman Louis Nicastro made only his third sale since '93.

Obviously what's most striking is the degree to which key insiders at both companies are reducing their holdings. This is especially curious given that the two rivals, are lining up to do some serious battle. As an investor, I'd want to see a little more poker face from executives at both.