Gaming Device Manufacturer Everi Calls off Share Buyback Plans

Article by : Erik Gibbs May 9, 2024

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Everi Holdings, the Las Vegas-based gaming device manufacturer, recently announced the termination of its $130 million share repurchase program. This decision could signal a shift in the company’s capital deployment strategy, with considerations now leaning towards offering a special dividend to shareholders.

The share repurchase program, initially greenlit by Everi’s board of directors approximately a year ago with a budget of $180 million, was slated to run through November 3, 2024. By the close of 2023, the company had already repurchased around $100 million worth of its shares under this program, leaving approximately $80 million unutilized upon its discontinuation.

The decision to terminate the share repurchase program coincides with Everi’s contemplation of implementing a special dividend strategy.

This shift has been prompted, in part, by the enactment of a mandatory sell-to-cover policy aimed at addressing tax obligations associated with restricted stock units (RSUs) and performance stock units (PSUs), which corporations commonly utilize as forms of executive compensation.

Everi’s rationale behind diverting capital from the stock repurchase program to potential special dividends stems from its belief that such a reallocation would better serve in maximizing shareholder value. However, specific details regarding the timing and magnitude of the proposed special dividend are yet to be disclosed.

International Game Technology’s recent merger announcement, which involved the merging of its global gaming and PlayDigital units into Everi in a monumental $6.2 billion deal, could potentially influence the decision to pursue a special dividend.

Despite the initial positive market reaction following the IGT merger reveal, Everi’s stock subsequently experienced a decline. Current performance indicates a 12% decrease over the past month and nearly 28% year-to-date.

The prospective special dividend is expected to reflect the cash flow generated by Everi up to the merger date, with its precise amount contingent upon the company’s cash and cash equivalents at closing surpassing a predetermined target threshold of $30 million.

Given Everi’s total outstanding shares, which amount to 83.47 million, funding a $30 million special dividend would entail relatively modest costs for the company.

It’s worth noting that special dividends are not uncommon within the gaming industry landscape. Several gaming companies, including MGM China, Wynn Macau, Red Rock Resorts, Golden Entertainment and Gaming and Leisure Properties, have recently opted to distribute special dividends to their shareholders.

The precise details and timing of the special dividend remain subject to further disclosure by the company.