Scientific Games Replaces CEO With ‘Cult’ Status, Shares Plungeby
Former Norwegian CEO Kevin Sheehan takes over for Gavin Isaacs
Sheehan’s lack of gaming-industry experience cited in selloff
Scientific Games Corp. named former Norwegian Cruise Line Holdings Ltd. Chief Executive Officer Kevin Sheehan to replace gaming-industry veteran Gavin Isaacs as its CEO, a move that sent shares down 16 percent.
Though Sheehan served as CEO of Norwegian for seven years and successfully guided the cruise-line operator through an initial public offering in 2013, his lack of experience in gaming may lead some investors to question his appointment, according to Steven Wieczynski, an analyst at Stifel Nicolaus & Co.
“Given Mr. Isaacs’s ‘cult’ status amongst gaming investors, we sense there are some owners who stayed loyal to the stock because of his direct oversight, who may now be more compelled to exit the name,” Wieczynski wrote in a note Friday.
Shares of Scientific Games plunged to $8.53 at 11:32 a.m. in New York Friday, the biggest intraday drop since November.
The gaming-equipment maker controlled by billionaire Ronald Perelman earlier Friday posted revenue of $729.2 million for the quarter, beating analysts’ average projection of $709.4 million. Operating income increased to $46.7 million from a loss of $800,000 in the year-ago period.
Isaacs, who had been chief executive of Scientific Games since June 2014, will remain on at the Las Vegas-based company as vice chairman of the board. While the change in CEO was expected after a period of M&A activity and subsequent integration, Isaacs is “extremely well respected in the equipment industry,” Wells Fargo analyst Cameron McKnight wrote in a note Friday.
Sheehan takes over a highly leveraged company at a time when the industry is grappling with a slower pace of casino openings and tepid machine-replacement orders. Scientific Games made a couple of high-profile acquisitions in the past several years to create one of the biggest global players in the lottery and casino-supply business. The deals, for Bally Technologies Inc. and WMS Industries Inc., had boosted Scientific Games’ debt to $8.4 billion at a time when consumers are betting less on slots and some in the industry wonder if young people will take to gambling like their parents did.