Virus costs three theme park chains over half their value

March 17, 2020, 5:33 PM · It's been a tough couple of weeks for the stock market. But it's been an especially tough time for people - including many fans - who hold stock in major theme park chains.

While the Disney and Universal theme parks are part of giant, multi-billion-dollar entertainment corporations, the next three most-visited chains in the United States are independent, publicly traded companies: Six Flags, Cedar Fair, and SeaWorld Parks & Entertainment. Over the past month, each of these three companies have lost over half of their market share.

As a result, Six Flags now has the largest market cap of the three companies, at $1.089 billion, while Cedar Fair is down to a $982.6 million market cap, and SeaWorld is worth just $688 million.

For perspective, Disney reported spent more on Galaxy's Edge alone than any of these entire companies are worth. If rumors are to be believed, Universal might be spending more than the current market value of Six Flags, Cedar Fair, and SeaWorld combined on its new Epic Universe theme park.

Yes, plenty of companies are losing value in the current market. The Dow Jones Industrial Average is down about 27 percent over the past month. Disney's stock is down 33 percent over that period, while Universal owner Comcast's stock is down about 17 percent. But keep in mind that one month ago, Bob Iger was still the President and CEO of The Walt Disney Company, so part of Disney's stock loss can be attributed to that. And both Disney and Universal are facing big losses at the box office due to theaters closing.

There's nothing else complicating the story at Six Flags, Cedar Fair, and SeaWorld. The market clearly does not like these companies' outlook, given that their parks are closed indefinitely and no one knows how willing - or able - people will be to pay for theme park visits once travel and crowd restrictions lift.

Yet each of these companies remain relatively capital-rich. Even if no one visits, they still own land and equipment worth millions. When capital-rich companies see their stock prices drop like this, they typically become a takeover target, as other companies with cash, or the ability to borrow, look to obtain the ailing corporation's assets.

With all three of these companies seeing their stock prices drop, however, the possibility that one of these three buys another becomes more difficult to envision. With the lowest market cap and fastest-falling stock price, SeaWorld would seem the most likely acquisition target at this point. But with market caps at or under a billion dollars, any one of the three could be an easy pick-up for big entertainment conglomerate.

Do keep in mind - for what it's worth - that if any entertainment company buys Six Flags that acquisition would trigger a clause in Six Flags' license of Warner Bros.' DC Comics and Looney Tunes franchises that would immediately terminate those rights. So Universal can't but Six Flags to get the rights to the Justice League for its theme parks. But - just sayin' here - if Warner Bros. wanted to get back into the domestic theme park business, buying one or more of these chains could give it the real estate it needs to reenter the American theme park market without having to start from scratch.

Other potential buyers, however, may look at these three firms with no intention of getting into the theme park business at all. They might see these companies as nothing more than real estate assets, with rides to be sold for whatever can be obtained. Truly, no one knows the future. But stock price drops like this suggest that it might not look much like the immediate past for these three companies.

Like it or not, Covid-19 is going to transform the American economy. Business that no one could have imagined closing will close, and businesses that no one could have imaged actually working will open and thrive. If you are fan of these theme parks, the best thing you can do for them right now is to stay home help stop the spread of this virus (remember - people with no symptoms can be carriers), hope that the virus peaks quickly, and plan a visit to these parks as soon as they reopen to help them reestablish their value, to both the public and the markets. (We will have discounted tickets for you, too.)

Replies (9)

March 18, 2020 at 2:05 AM

Cedar Fair is the only company of the three that has reasonable financial parameters to begin with. Six Flags has a negative debt to equity ratio (which isn't surprising but ridiculous nonetheless) and Sea World has an extremely high debt to equity ratio (which isn't surprising, but ridiculous nonetheless). Safe to say neither company was prepared for something like this to happen - when you lay off almost all your full time staff and then move your customer call center to Jamaica, that's pretty big sign you're in deep doo doo.

I can't think of any company who would be interested in buying them out maybe other than Cedar Fair. CF buying SF would make sense if there was a SF firesale (which looks plausible) but several other entertainment companies were already in the theme park biz and bowed out and that was when the economy was good. Cedar Fair buying Sea World would be a disaster unless you don't care about the zoological aspect and only care about rides.
EDIT: There's also that Spanish company that owns Kennywood as a potential buyer, honestly I have no idea how their financial outlook is but if their parks are all ran like that Warner Bros park in Spain (which I went to last year and was a poorly maintained dump that has never gotten a major new attraction since it opened) that wouldn't be something I would be hopeful for.

Also, because of the strange circumstances surrounding this downturn, its possible that the federal government will bail them out. The ultimate funny thing is if SF and/or SW get government money even though they were tanking regardless of coronavirus, and come out unscathed (it sounds crazy but when industries are tanking things like that have happened before).

March 17, 2020 at 6:19 PM

I own stock in all three. I want these parks saved. I do not believe any parks will open until Memorial Day Weekend but I want their employees paid during that time. It is also important for both Disney and Universal that the regional parks survive so the ride manufacturers survive. I want Disney to buy and save Seaworld and Universal to buy Six Flags and buy the DC rights. They have a good relationship with WB, look at HP. They would have to give up Marvel rights for free but it would be worth it. The regionals are facing debt payments with no money coming in, losing customers because of higher unemployment and just a completely messed up cash flow. Save the regional park. Disney and Comcast must step up.

March 17, 2020 at 6:28 PM

Talking of Sea World ...... our company's summer outing was due to be held at SWO on May 16th. They called the organiser and said they were unable to say for sure if the park would be open by then. We agreed to cancel.

I know they are playing it safe, but I think we all realise this 2-week shutdown is likely to go on a lot longer. Sea World will really hurt if they miss the Easter period. Worrying times for SWE that's for sure.

March 17, 2020 at 8:16 PM

It will absolutely break my heart if anything happens to Busch Gardens/Sea World.

March 17, 2020 at 11:19 PM

Hmm. Think strategically. Disney would probably not be interested in a whole chain. But. Disney should be very interested in Knott's berry farm for the real estate. They can keep Disney appropriate rides and demolish and re develop others. In fact. Before Disney demolished the parking lot and made the deal with anaheim for the huge parking structure, multiple credible sources say they were in negotiation with the knott family. The owners at the time. It's a smaller purchase, but Universal should buy fun spot only about one football field away in orlando from their parking lot. There may be other strategic purchases near the existing parks for the big chains that make sense as well. Where they should be able to get a very favorable price.

March 18, 2020 at 1:30 AM

Obviously nobody knows what will happen, but if I were a gambling man here's how I'd bet this will play out...

Cedar Fair will likely weather this the best of the three chains. That doesn't mean they'll be unscathed, as I foresee a lot of event cancellation this year and delays to most capital investment of one to two seasons. However, I think they're strong enough that all parks will survive and the chain will remain intact.

Six Flags, on the other hand, will probably take the most damage from it. Their model was already on unstable footing, and if closures are extended they may be forced to sell or shutter some of their less profitable parks to stay afloat. They are helped slightly by their memberships, which ensure revenue is still coming in during a park closure, but I wouldn't be surprised if this is countered by higher than usual cancellations in the coming quarters. Best case scenario I see for them is selling off a few parks and scaling back investments in their other properties in the coming years. Worst case scenario is the chain dissolves, with several other companies picking up the major parks and the smaller ones closing for good.

SeaWorld is a bit of a wild card. They clearly are making enough to invest in several major coasters in one year, yet if those rides miss too much of the season the lost revenue could put them in danger of collapse. In that case, a full chain acquisition seems the most likely route, though I could also see certain parks (SWSA and BGW) being pieced out as well.

Whatever the future holds, the fallout of COVID-19 on the theme park industry is going to be very interesting to watch. Once parks start opening back up, I highly encourage everyone to get back to as many of their favorites as they're financially able to get to. You may be able to help save it...or get that final visit before its demise.

March 18, 2020 at 11:59 AM

Global pandemic? I'm outta here.
-Bob Iger.

March 18, 2020 at 5:12 PM

Touche Gabriel!

March 21, 2020 at 5:02 AM

Stockholders selling/buying (nothing ever can be sold, without an actual buying at the other side of the counter, also so with stock... let's never forget that !) are sometimes acting in reasoned speculation, sometimes in panic.
Need to remember that the value of a company consists of more then only a momentary share value X total shares. Turnover and profit (two real world, hard cash financial factors) are quite independent from the virtual/gambling value of stock. When in a group, one park is sold to another group, again, the price paid does not have a relation with "the share value of the day" for that group.
Let's never forget all that.
And, wait for the after-Covid-19 gambling...
Totally independent theme parks, as such businesses are effectively but mainly (?) still thriving in Europe, most often do not even have a notation on the stock market. Or only for a specific fraction of the total assets.
They communicate in a different way, right now.
In my opinion, shifts are not going to happen. At least, not on a more explicit driven way then the park estate trade is done in 'normal' circumstances.

By the way, I like to react on one note made by "the_man" (first comment above):
Quoted : "... that Spanish company that owns Kennywood as a potential buyer, honestly I have no idea how their financial outlook is but ..."
> That company has a rather curious position in the theme park world. Although they do operate all those parks in the group, the actual business goal of the company is: Park Trader, for the big investment company behind them.
Just and always looking for the best moment to sell/buy parks and make highest profits on that transaction. They do not have "end customers" as their business goal, their only real customer is the main stockholder behind the curtain. That's why service level, maintenance etc etc always is so low, in all their parks.

Cheers


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