MGM Resorts soars 25% after IAC buys 12% stake, calling it 'once in a decade opportunity'

• MGM Resorts soared as much as 25% on Monday after IAC said it bought a 12% stake in the company for approximately $1 billion.
• IAC Chairman Barry Diller called investing in MGM right now a "once in a decade opportunity."
• IAC has been looking to put cash to work after completing its spinoff of Match Group in June, which netted the internet media company $3.9 billion in cash.
• Diller said in a letter to shareholders that he sees potential for MGM's currently small online gaming business to grow into a meaningful earnings driver over the long term.
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MGM Resorts jumped as much as 25% on Monday to $23.79 after IAC took a 12% stake in the company for approximately $1 billion, calling the investment a "once in a decade opportunity."

The internet media company has been looking to put cash to work after it completed its spinoff of Match Group, which generated $3.9 billion in cash for IAC.

IAC's MGM stake consists of common stock it bought in the open market

In a letter to shareholders, IAC Chairman Barry Diller said what initially attracted the company to make the investment into MGM Resorts was the potential for its online gaming business to grow to be sizable over the long term.

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Diller signaled that IAC plans to be a long-term strategic partner, and welcomes the potential to collaborate with MGM to help it accelerate its foray into the online gaming business.

Online gaming has seen a surge in recent years thanks to the easing of restrictive state regulations across the country and the debut of fantasy sports betting apps like DraftKings.

"What initially attracted us to MGM ... was an area that currently comprises a tiny portion of its revenue – online gaming," Diller explained.

Diller went on to say that MGM's physical resorts are well positioned to bounce back once the COVID-19 pandemic subsides, and signaled that its free cash flow over the next decade could exceed its current valuation.

Diller isn't the only one who thinks casino companies could be a good investment at current levels. On Friday, Tom Lee of Fundstrat said reopening stocks like those in the casino industry are set for a "monstrous rally" later this week.

"Although we would never 'bet the company,' we know that this is a large bet for IAC," Diller concluded.

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