The Crown Resorts Ltd (ASX: CWN) share price is outperforming the market this morning as the market doesn't believe the takeover battle for Australia's largest casino group is over after its suitor walked away.
The CWN share price jumped 1.8% in morning trade to $13.00 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index lost 0.3% of its value following news that Prime Minister Scott Morrison had officially fired the five-week starting gun on the federal election.
Crown's share price took a beating yesterday after would-be buyer Wynn Resorts, Limited called off merger discussions with Crown's board when news of the takeover approach was leaked.
But the stock is still comfortably above Monday's closing price of $11.74 – just before the news broke.
Why Wynn might be coming back
That's a clear indication to me that the market doesn't believe Crown is no longer a target. If anything, there are a few reasons to think Wynn will be back. If not, I won't be surprised if another interested party surfaces – and that's something Wynn will not want.
Like it a not, Crown is on the auction block and that's unlikely to change with or without Wynn at the table.
This is primarily because Crown's largest shareholder James Packer is seen as a very willing seller of his 46% stake in the group.
Crown has also been looking like a lame duck over the past several months and appears to me to have lost direction with several earnings headwinds buffeting the stock and a lack of a growth vision after its disastrous retreat from overseas markets like Macau.
Coming back to Wynn, analysts covering the US stock believe that Crown is a great match because the ASX-listed company's assets are strategically aligned to the NASDAQ-listed group's stated goals.
Wynn's management has publicly stated it was looking to expand overseas and Australia is as attractive market as any in this region given the relatively high per-capita gambling rates and its attraction to Chinese high-rollers.
Foolish takeaway
These high rollers appear to be absent from Australia in more recent times but that's probably more due to cyclical than structural factors – meaning these Asian gamblers are likely to be coming back.
But buying a stock just for its takeover appeal is almost always a bad idea for retail investors. There's just too many unknowns that are impossible to predict, and to be honest, I think the Aristocrat Leisure Limited (ASX: ALL) share price and Jumbo Interactive Ltd (ASX: JIN) share price look like more promising bets.
On the other hand, some patient investors could be tempted to dip their toe in the water on the belief that Crown's share price has finally found a bottom after hitting its lowest level since 2017 in February this year.
