The Chinese government has threatened stricter regulation for Wynn and other casinos with facilities on Macao. The licenses for these casinos expire within a year.
“For years we’ve said people are ignoring that the concessions expiring next year are at risk,” Chanos, who made his name shorting Enron prior to its 2001 bankruptcy, told CNBC.
“The law expires in June of next year and has to be re-written. … We think that the very lucrative Macao concession will be at best cut back and at worst cut back dramatically.”
Wynn on Monday closed at $82.11, down 1.4%. It has plunged 22% in the last week, following China’s regulatory threat.
“Wynn should be trading in the $40s right now,” Chanos said. “It’s one of the most expensive casino stocks out there.”
As for other analysts, Morgan Stanley’s Thomas Allen cut his price target on Wynn to $113 from $138 Monday, but kept his weighting at overweight.
The stock is "worth the risk,” he said. "Wynn benefits from incremental value from U.S. sports betting and its excess Las Vegas land."
Meanwhile, Chanos isn’t too keen on Chinese stocks either. “It’s the only major market, as I keep pointing out, for the past 12 years that’s gone down,” he said.
“And over that time frame the Chinese economy has more than doubled. This has been a terrible place to keep your money as a Western investor and I think it will continue to be.”