Investor says theme park company could add $11 per share by monetizing its real estate and restructuring operations
Jonathan Litt’s Land & Buildings Investment Management, a hedge fund and approximately 3% shareholder in Six Flags Entertainment (NYSE:SIX), on Wednesday, urged radical changes and said that the theme park company could add $11 per share by monetizing its real estate and executing an operational turnaround.
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The hedge fund believes that a REIT conversion or sale of the company's real estate could double its share price in 18 months. Land & Buildings also believes that multiple parties would be interested in a sale-leaseback transaction of Six Flags parks at a premium valuation and that a Six Flags REIT would trade at a superior valuation compared to SIX shares today.
The company faced challenges recently, including declining attendance and financial struggles. In response, Six Flags tweaked its strategy, updating its parks and rides, expanding its partnerships and sponsorships, and focusing on the guest experience. Despite these efforts, the company's stock price languished, which has led to criticism from investors like Litt.
Six Flags confirmed that it received Land & Buildings presentation and replied that it "regularly engages with investors and values constructive input from shareholders. Six Flags is optimistic about its progress under its strategic plan and remains committed to providing a top-quality guest experience and driving long-term earnings growth," the company said.
Activist investors have played a significant role in Six Flags' recent history, advocating for strategy and management changes to improve the company's performance and increase shareholder value.
One example of an activist investor at Six Flags was Paul Singer's hedge fund, Elliott Management. In 2010, Elliott acquired a significant stake in Six Flags and began pressing for changes at the company. This included pushing for the sale of noncore assets, reducing debt, and improving financial performance. In 2011, Six Flags announced a restructuring plan that included selling several properties and appointing new board members. The company's stock price rose significantly following these changes, and Elliott Management ultimately realized a profit on its investment.
Other activist investors have also taken positions in Six Flags and advocated for changes at the company. For example, in 2017, Marcato Capital Management acquired a stake in Six Flags and called for the company to improve its financial performance and increase shareholder value. The company ultimately adopted Marcato's recommendations, including selling certain properties and appointing new board members.
Article by Greg Morcroft, Fintel
