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Rod Smith

Mandalay Execs Sell off Shares

3 October 2003

LAS VEGAS -- Mike Ensign and Bill Richardson have sold off the last of their stock holdings in Mandalay Resort Group, leading analysts to speculate Thursday that the longtime casino executives are preparing to leave the company they helped form.

Ensign, Mandalay Resort's chairman, and Richardson, the company's vice chairman, sold their remaining 2.9 million shares in the company for roughly $120 million each at the end of September, according to federal Securities and Exchange Commission documents filed Wednesday.

The latest sell-off follows last summer's sale of about $140 million worth of shares each and $36 million worth of shares each sold recently.

The SEC document offered no explanation for the sales, and company executives either declined to comment or could not be reached Thursday.

After their earlier stock sales, the executives refused to comment other than to say they were rearranging their stock holdings.

Analysts speculated that, in the absence of any explanation from the company, the stock sales could mean Ensign, 64, and Richardson, 55, are planning to leave the company and are diversifying their personal investment portfolios.

The Review-Journal also reported this summer that Ensign and Richardson had told friends in the gaming industry they did not want to die owning a casino company.

The earlier sales reduced the executives' holdings in the Las Vegas-based company by more than half, and the new sales are believed to essentially close out all of their stock holdings in Mandalay Resort Group.

"The new sale amounts to what we believe is their remaining stock holdings in Mandalay Resort Group, after they each sold more than 3.5 million shares this summer," Deutsche Bank analyst Marc Falcone said.

Prior to the sales, Ensign and Richardson held a controlling ownership stake in the company, which was formed when Circus Circus Enterprises was reorganized as Mandalay Resort Group in 1995.

The sales appear not to have affected Mandalay's stock prices.

Shares in Mandalay Resort Group closed Thursday at $39.50, unchanged for the day, but up 30 percent year to date. That compared to the Standard & Poor's 500, which closed at 1,020.24, up 13 percent year-to-date.

"Typically, insider sales do not give us cause for concern, and we respect executive's desire for diversification; but we believe some of these share sales could reflect the strong run in the stock year-to-date," he said.

Other Wall Street sources said they doubted the sell-off was motivated by any anticipated negative developments because, under the year-old Sarbanes-Oxley Act, selling into bad news would be committing a felony, which they doubted Ensign or Richardson would do.

The Sarbanes-Oxley Act, enacted last year in response to Enron and other corporate scandals, requires companies to make new disclosures on internal controls, ethics codes and the makeup of their audit committees on annual and other public reports.

Still, analysts noted the absence of any statement or explanation in the wake of the SEC filings was "unusual and disappointing."

"While we understand the need for asset diversification, we think that this magnitude of selling should have come with some explanation," Falcone said.

Prior to last summer's sell-offs, the pair jointly held about 20 percent of the outstanding stock in the company.

In addition to Richardson's and Ensign's sales, Chief Financial Officer Glenn Schaeffer recently sold $4.2 million in Mandalay shares.

Schaeffer was out of the country and could not be reached for comment.

While trends for Mandalay Resort Group appear solid into 2004, analysts said, the volume of Ensign's and Richardson's sales over the past several months could keep shares from appreciating over the near term.

"Likewise, it remains hard for us to argue for higher valuation for the company or that investors should put new money to work when insiders are selling nearly every share they own," Falcone said.

Deutsche Bank advised investors it was maintaining its "buy" rating on Mandalay stock, but it expected shares to stay near current levels "until investors get more comfortable with the rationale (or lack of) for these sales."

Ensign has been chairman and chief executive officer of Mandalay since Jan. 6, 1998, and previously was chief operating officer.

Richardson has been vice chairman since June 18, 1998, and a member of the board of directors since June 1, 1995.

They were previously involved in an executive capacity in the management and operations of Gold Strike Entities prior to its sale to Mandalay in June 1995.

The so-called Gold Strike properties included two hotel/casinos in Jean, a hotel/casino in Henderson, a 50 percent interest in a joint venture that owns Grand Victoria, a riverboat casino and land-based entertainment complex in Elgin, Ill.; and a 50 percent interest in a joint venture that owns the Monte Carlo in Las Vegas.

Mandalay Resort Group owns and operates Mandalay Bay Resort, Luxor, Excalibur and Circus Circus in Las Vegas, and hotel-casinos in Reno, Jean and Laughlin as well as Henderson. It also owns a hotel and dockside casino in Tunica County, Miss. And it is also a majority investor in a temporary casino in Detroit.