As this “PR battle on the high seas” continues to unfold, important questions should be raised. Who will win this PR battle? Should this be cause for concern with SeaWorld investors? Are there more attractive investment options in the amusement park industry? We will be diving into the answers to these questions and see how even if SeaWorld “wins the argument,” the damage Blackfish is currently wreaking will outweigh, and there are better options for investors to look into.
Why SeaWorld will be harmed
To approach the question by pitting Blackfish against SeaWorld and asking who will win or lose is erroneous. Even if SeaWorld successfully disproves Blackfish’s claims, the company will most likely have already lost in the court of public opinion. Consider the example of the “Gasland” documentary, and how public debate has erupted and actual policy change has been enacted over hydraulic fracturing. Even though the claims of Gasland are hotly disputed, and a counter-production to Gasland was created, Gasland’s bad PR effect on hydraulic fracturing is still influencing people and policy-making today. Blackfish will most likely have the same negative affect on SeaWorld at a time when SeaWorld badly needs revenue.
In the beginning of 2013, I wrote a blog post about SeaWorld going public entitled “Shamu Makes a Splash on Wall Street: The New SeaWorld IPO.” In that post, I outlined why SeaWorld’s stock price might have some potential to rise, but overall the company is a very risky investment to stay away from. Many of the talking points I raised in that post are still legitimate almost eight months later. SeaWorld does have a fairly nice dividend payout, but I would stay away from SeaWorld stock for now, especially in light of the growing Blackfish scandal. The fallout from Blackfish shouldn’t be overestimated and will most likely last only a few months to a year at most. SeaWorld still needs to grapple with other looming issues first, though, and that is why SeaWorld stock is a risky gamble at best.
In an interview on Friday, Mr. Atchison gave some hints as to what those plans might be. Currently, SeaWorld Entertainment operates 11 theme parks in the United States, including SeaWorld and Busch Gardens, without a presence overseas.
“We could take our Shamu show in Orlando and probably show it in Malaysia or Abu Dhabi or Dubai,” Mr. Atchison said. “There’s a lot of interest in our brands from overseas.”
He cautioned that there is no “imminent announcement” along these lines.
Though building new theme parks requires capital, Mr. Atchison suggested that such projects could be undertaken in partnership with big investors, such as a sovereign wealth fund, which might add hotels or other structures to the development.
“If you look at these development opportunities, they’re often in connection with other real estate plays,” he explained. “A lot of the development opportunities we have are actually capital-light.”
New parks need whales. And that means breeding, and continuing to roll that Kshamenk AI program forward.
More than three years after its $2.3 billion sale by Anheuser-Busch InBev (BUD) to private-equity giant Blackstone (BX), SeaWorld (SEAS) is trading on the NYSE after raising a reported $702 million in one of the largest IPOs of the year. In its first minutes of trade, the stock is up 15% from its offer price of $27, which was at the top of a range starting at $24.
SeaWorld sold 10 million shares and Blackstone an additional 16 million, more than the 10 million originally slated. The underwriters, including Goldman Sachs and JP Morgan, have a 30-day option to sell an additional 3.9 million shares at the offer price. The deal values SeaWorld at just above $2.5 billion. This debut is part of a busy week for IPOs, which included New York-based grocery chain Fairway (FWM) on Wednesday.
Yahoo mentions the risks (another trainer tragedy, public opposition to orca captivity, and potential OSHA restrictions) that we have covered before, and adds:
When contacted regarding the IPO, a representative for People for the Ethical Treatment of Animals, or PETA, provided its official statement on SeaWorld, which includes its plan to purchase stock Friday in order to “educate other investors about the suffering endured by … animals who are confined to tiny barren tanks for human amusement … and push for their release.”
Other factors investors should keep in mind when deciding whether to dive into SeaWorld stock or stay onshore: The company’s high debt levels and multiples. SeaWorld, when it filed to go public, had $1.8 billion in long-term debt, some of which was incurred by a special dividend of $500 million paid last year to Blackstone (following a $100 million dividend in 2011). SeaWorld states in the filing that its debt could hinder its ability to raise additional capital. Also, its high price tag gives the company a hefty trailing PE of more than 27, exceeding Cedar Fair’s 22 and Six Flags’ 10.99 (per Yahoo! Finance data).
Having PETA attend shareholder meetings is definitely one consequence of going public that SeaWorld will not enjoy.
SeaWorld: Our Investors Should Know That It’s Bad For Business When Our Killer Whales Kill People
And then BI cites this important, but unusual, section of SeaWorld’s IPO filing:
Below is the aforementioned section of the prospectus (emphasis added):
Featuring animals at our theme parks involves risks.
Our theme parks feature numerous displays and interactions that include animals. All animal enterprises involve some degree of risk. All animal interaction by our employees and our guests in attractions in our theme parks, where offered, involves risk. While we maintain strict safety procedures for the protection of our employees and guests, injuries or death, while rare, have occurred in the past. For example, in February 2010, a trainer was killed while engaged in an interaction with a killer whale. Following this incident, we were subject to an inspection by the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA), which resulted in three citations concerning alleged violations of the Occupational Safety and Health Act and certain regulations thereunder. We have appealed certain of these citations and the appeal process is ongoing. In connection with this incident, we reviewed and revised our safety protocols and made certain safety-related facility enhancements. This incident has also been the subject of significant media attention, including television and newspaper coverage, a documentary and a book, as well as discussions in social media. This incident and similar events that may occur in the future may harm our reputation, reduce attendance and negatively impact our business, financial condition and results of operations.
In addition, seven killer whales are presently on loan to a third party. Although the occurrence of any accident or injury involving these killer whales would be outside of our control, any such occurrence could negatively affect our business and reputation.
That about covers it, no? So the investors can’t say they weren’t warned.