One of entertainment and gaming's biggest proposed deals has taken a dramatic turn, then another. After Barry Diller walked away from his $18 billion offer to acquire MGM Resorts' remaining stake, reports emerged Thursday suggesting MGM might now circle back with a counter-bid for Diller's People Inc. The power dynamic between these two has shifted sharply in just a matter of days.

Market Moves Signal Changing Fortunes

The Wall Street Journal broke the story first, citing sources in the know. Investors responded immediately. People Inc shares jumped 10% this week following Diller's withdrawal, while MGM's stock dropped nearly 15% over the same stretch. Those diverging trajectories tell you everything about how the market views each company right now.

Diller's original rationale was fairly straightforward: he wanted to diversify his holdings as artificial intelligence and tech increasingly dominate the business landscape. MGM's tangible assets, especially its casino and hospitality portfolio, offered protection against potential disruption to his media and publishing interests. When he said the deal "ingredients" weren't "coming together", he was almost certainly pointing to rising borrowing costs and regulatory friction, not doubts about MGM itself.

Strategic Logic Less Clear in Reverse Direction

What MGM actually gains from acquiring People Inc? That's harder to explain. The publisher sits at a $3 billion market cap and owns some recognisable properties: People magazine, Food and Wine, and a few others. For a casino operator, the strategic fit doesn't jump out, particularly when MGM is already dealing with operational pressure. The company's lost roughly 25% of its value in just the past month.

MGM Chairman Paul Salem wasn't exactly encouraging acquisition chatter when he responded to Diller's departure. He stated confidently that the company had a "clear path to increasing shareholder value" through existing strategies. A careful response that steered well clear of any hint the operator was hunting for deals.

Analyst Confidence Remains Intact

Stock pressure aside, analysts remain constructively positioned on MGM. Most reckon external factors, not operational weakness, torpedoed the Diller transaction. Macquarie analyst Chad Beynon called MGM's implied enterprise value of roughly $5.9 billion "a striking discount". Over at Truist, Barry Jonas keeps a "Buy" rating with a $55 price target, which would represent substantial gains from the current level near $32.50.

Diller, who began investing in MGM in 2020 and now holds a 27% stake worth around $3 billion, emphasised his "total confidence" in the company even as he stepped back. Worth noting: People Inc stated it remained "open to and interested in the possibility of a strategic transaction with MGM Resorts", deliberately keeping the door open should something new come knocking.