Private Equity: Is Dave and Busters a PIPE Dream?

April 3, 2020 | News, Private Equity

Dave and Busters (NASDAQ:PLAY) have been hard hit by the economic downturn.

The restaurant and arcade company closed its stores across the United States. It furloughed at least 15,000 hourly team members, store management, and corporate staff. Meanwhile, it cut the compensation of the senior leadership team by 50 percent.

And the Board of Directors has suspended Directors’ cash compensation for the remainder of the year.

So… what next?

Dave and Busters Earnings

The company just reported an excellent first quarter yesterday. Revenues continued to climb, profits were up, and they had opened a bunch of new stores across the country. Management should be rising high and cashing fat bonus checks.

Instead, they are suspending all new store openings. It also halted all construction. PLAY eliminated its dividend. It halted all stock buybacks. The firm is now having discussions with landlords and vendors to reduce expenses, extend payment terms, and obtain other payment concessions. With the stock down 75% in the last three months, management is in survival mode.

Part of surviving may be a significant investment by a private equity firm. Private equity leader KKR (NYSE: KKR) took a 6.3% stake in the company. The firm has been looking for opportunities to make private investments in public equity (PIPE) investments as prices have collapsed in the selloff caused by the spread of coronavirus.

Dave and Busters was a fast-growing chain before the virus arrived on our shores. Investing the cash to prop up the company until the crisis passes could result in huge returns for private equity investors who step up right now.

By: Tim Melvin

Recent: Real Estate: Cohen and Steers Issues Report on Coronavirus

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