To The Moon

Shares of $MGM Resorts International(MGM)$ surged this week on news that the company got a buyout offer from Peoples Incorporated, formerly known as IAC, the name I’m going to use here.

The offer is for all of MGM for $48.30 per share.

Here is the letter in full:

Dear Members of the Board of Directors:

People Incorporated (f/k/a IAC) began investing in MGM in 2020, based on our view that it represents a durable growth business not easily displaced by technology.

We believe that MGM’s assets and businesses are not currently realizing their full potential in the public markets and that it will be difficult to correct this situation in MGM’s current form as a public company. Accordingly, we would like to work with MGM to agree on a transaction in which our company and other investors provide MGM’s public shareholders with an attractive premium in cash for their interest in MGM, and MGM would become a private company. People Incorporated is accordingly submitting a non-binding proposal to acquire all of the outstanding shares of common stock of MGM not already owned by IAC, for 100% cash consideration of $48.30 per share. This proposal represents a premium of 24.1% to the volume-weighted average price of MGM common stock for the 30 trading days ending on May 29, 2026, a more than 30% premium to the volume-weighted average price for the 90 trading days ending on the same date, and a 10.6% premium to the most recent closing price.

People Incorporated will be a good steward for MGM’s assets, given our large stake in the business today and our deep familiarity with the business. MGM shareholders will receive attractive value for their shares, fully de-risking their investment at a compelling return.

Our proposal is subject to customary conditions, including the negotiation and execution of a mutually satisfactory binding agreement. Given our substantial knowledge of MGM, we expect that we can complete our confirmatory due diligence quickly, in parallel with negotiation of the definitive transaction agreements and finalizing required financing, and reach a prompt signing.

We can deliver a highly certain transaction. The transaction would not be subject to any financing condition, and we are confident in our ability to fund the purchase price while maintaining prudent leverage, based on existing cash on hand at People Incorporated and MGM and preliminary conversations with other potential equity investors and financing sources. The transaction would be subject to limited competition approvals and applicable gaming regulatory approvals, and we would work closely with MGM in obtaining those approvals.

We expect that People Incorporated would own just over a majority of the post-closing equity in MGM, and would have control over the business, with minority ownership by other investors (who may include some current MGM shareholders). We expect MGM’s current management team would continue to lead the business and would seek to discuss suitable terms with the relevant individuals at the appropriate point in the process.

We fully recognize that the MGM board will need to consider this transaction under the appropriate Delaware procedures, and of course I will recuse myself from any deliberations of the MGM Board regarding this transaction or any alternative. We wish to confirm to you that People Incorporated has no intention to sell our existing ownership stake in MGM, or to pursue or vote in favor of any merger or other similar extraordinary transaction that would result in a change in control to another party or dilute in any meaningful respect our economic and voting interest in MGM.

This letter is a non-binding expression of interest only, and People Incorporated reserves the right to withdraw or modify the proposal at any time, or to terminate discussions and negotiations at any time in our sole discretion. No legal obligation with respect to our proposal or any other matter will arise unless and until we have executed definitive transaction documentation with MGM. People Incorporated intends to promptly file an amended Schedule 13D reflecting the submission of this proposal. We are prepared to work expeditiously to agree to a definitive transaction.

Barry Diller

The offer has been a short-term win for MGM, and I agree with a lot of Diller’s assessment that the stock is undervalued. I also see the plan to keep current management in place as a sign that this is the market undervaluing the stock, not a problem with current management.

And Diller sits on the board of directors, so he should know more about MGM’s operations than anyone.

But I don’t like this deal. Let’s go through the positives first before getting to my conclusion.

Why I Like This Offer

It’s hard not to like an offer like this on the surface.

Obviously, the market got wind of something in mid-May, leading to the sharp increase in MGM’s shares. But this is a real offer that’s a nice premium to where MGM’s shares were trading a month ago.

If absolutely nothing else, this has put some focus on MGM’s shares.

For a moment, the stock traded for a slight premium to the offer, indicating that investors think a higher price. There’s an entire industry of these “special situations” where investors bet on the closing price of a deal like this, so my natural inclination was that I could see a higher price happening.

Here’s the problem: Could Diller go higher?

Why I’m Calling B.S.

The offer gets attention, but what does it accomplish?

1. Management would stay the same

2. IAC would need to take on debt (or sell stock) to fund a deal

3. This isn’t even a “go private” transaction because…IAC is publicly traded

To make matters even stranger, IAC’s current business, which consists of a lot of legacy media publications, is losing money.

And IAC’s balance sheet isn’t exactly pristine.

What does a buyout accomplish?

Maybe it leverages up MGM more than it currently is, but it doesn’t change operations or take the company out of public scrutiny.

There are also the complications of buying a public gaming company, which would involve the acquirer being licensed in every state where they operate.

Add it up, and I just don’t think this is a deal that will get done, much less at a higher price.

The ultimate goal may be as simple as forcing management to get more aggressive.

Maybe MGM should take on $3 billion in debt and buy back 25% of the company?

Maybe more asset sales should be in the works?

IAC doesn’t seem like a very capable buyer of a company this large and I have my doubts a deal gets done.

Now What?

One of the great things about an acquisition offer is knowing that big, smart players in the market think the same way you do.

I appreciate Diller seeing the value in MGM that I see, particularly because he sits on the board.

But I would also like to participate in the upside of the core business and ultimately in MGM Japan starting 4 years from now. Maybe that would be possible through IAC, but I don’t want to own the current IAC $hit-co just to get exposure to an even more highly leveraged MGM.

I’m not selling on this rumor, and I wouldn’t be surprised if Diller and management come to an agreement to unlock shareholder value by taking on more debt, buying shares, and/or selling assets.

A buyout just to move the stock from one public company to another just doesn’t make sense to me.

I think a year from now, MGM Resorts will still be publicly traded. But I guess having limited downside in the case of a buyout isn’t the worst thing in the world.

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