I own calls in this stock. Hope my math is decent below.
With all due respect Herb, you are underestimating them. They already have 30M shares in Treasury, soon to be over 40m. With $200M cash they can purchase the entire balance of the float at $9 per share and take the company private. I've never seen anything like this. Then what happens? What about all the mutual funds, other institutions? What about the shorts?
It is totally true that a large insider could dump their stock early and ruin the party- but only a total moron would do that. You are basically saying they are morons and can't manage cash which is why they are buying stock and paying a divi in the first place. I do not think you are correct here. This company could literally squeeze the piss out of these shorts and force them pay off the debt of the entire company.
Regarding the CEO's options, strikes are 15, 17, and 20. I hope no one is working there to see the stock to $25 - they should be aiming at $100.
I'm in, we'll see, I am frequently wrong. Good luck, thank you for the write up, Herb.
I appreciate the analysis here, but I tend to disagree. Clawing back lease payments and tagging that alongside debt doesn’t seem to make much sense when assessing net leverage. All-in it’s accretive to do the sale leasebacks because the lease payments end up being less than the interest payments and they capture more equity by arbitraging the going-in cap rate with the proforma cap rate on the sale when they sell to a VICI with them as a tenant. I also seem to think it’s never a good idea to short a stock that does generate cash both on existing alleys and new alleys (growth capex and maintenance capex should be separated here) with major levers to pull on the ancillary income front (PBA, events, and arcade). Though I agree they’ve pinched the consumer a bit, they have a lot of growth to go in the event space and should generate cash nicely. At this point shorts are kind of stuck and I don’t really see how shares don’t trade into the $17 range until those shares get earned out. The float is tied up and it’s possible the insiders are not lending out their shares. It might be a good short, but not at $13. At $20, we have a different picture though. Full disclosure I’m long a bunch of shares.
Thanks for your comments, Josh. I have zero view of this as a short, but as with all of my red flags - with thousands of stocks out there, there are higher quality stocks to own. As the saying kinda goes, disagreement is what makes markets! Best of luck with it!
If they can earn 20%+ on their equity invested in capex, so long as they continue to pay down debt and buy back stock it’ll be accretive to shareholders.
I’m not denying that the stock might be fairly valued and management is using financial engineering here, but all signs point to a higher share price with aggressive share reduction, debt reduction and the dividend. I think shorts will slowly unwind here.
I own calls in this stock. Hope my math is decent below.
With all due respect Herb, you are underestimating them. They already have 30M shares in Treasury, soon to be over 40m. With $200M cash they can purchase the entire balance of the float at $9 per share and take the company private. I've never seen anything like this. Then what happens? What about all the mutual funds, other institutions? What about the shorts?
It is totally true that a large insider could dump their stock early and ruin the party- but only a total moron would do that. You are basically saying they are morons and can't manage cash which is why they are buying stock and paying a divi in the first place. I do not think you are correct here. This company could literally squeeze the piss out of these shorts and force them pay off the debt of the entire company.
Regarding the CEO's options, strikes are 15, 17, and 20. I hope no one is working there to see the stock to $25 - they should be aiming at $100.
I'm in, we'll see, I am frequently wrong. Good luck, thank you for the write up, Herb.
I appreciate the analysis here, but I tend to disagree. Clawing back lease payments and tagging that alongside debt doesn’t seem to make much sense when assessing net leverage. All-in it’s accretive to do the sale leasebacks because the lease payments end up being less than the interest payments and they capture more equity by arbitraging the going-in cap rate with the proforma cap rate on the sale when they sell to a VICI with them as a tenant. I also seem to think it’s never a good idea to short a stock that does generate cash both on existing alleys and new alleys (growth capex and maintenance capex should be separated here) with major levers to pull on the ancillary income front (PBA, events, and arcade). Though I agree they’ve pinched the consumer a bit, they have a lot of growth to go in the event space and should generate cash nicely. At this point shorts are kind of stuck and I don’t really see how shares don’t trade into the $17 range until those shares get earned out. The float is tied up and it’s possible the insiders are not lending out their shares. It might be a good short, but not at $13. At $20, we have a different picture though. Full disclosure I’m long a bunch of shares.
Thanks for your comments, Josh. I have zero view of this as a short, but as with all of my red flags - with thousands of stocks out there, there are higher quality stocks to own. As the saying kinda goes, disagreement is what makes markets! Best of luck with it!
I'm curious. You said that "does generate cash" but Herb states that " free cash flow is negative." That seems like a discrepancy to me.
I think it boils down to maintenance capex vs growth capex. Here is a good link: https://app.tikr.com/stock/financials?cid=1475871&tid=1761627987&tab=cf&ref=q1com4
If they can earn 20%+ on their equity invested in capex, so long as they continue to pay down debt and buy back stock it’ll be accretive to shareholders.
I’m not denying that the stock might be fairly valued and management is using financial engineering here, but all signs point to a higher share price with aggressive share reduction, debt reduction and the dividend. I think shorts will slowly unwind here.