Flush With Fresh Cash, Is Dave & Buster's Entertainment a Buy?
Beleaguered Dave & Buster's Entertainment (NASDAQ: PLAY) stock has dropped over 70% year to date, down in the dumps and seemingly banished there for good as the entertainment venue, sports bar, and restaurant concept remains temporarily closed. The lockdowns intended to slow the spread of the COVID-19 pandemic have brought on financial ruin for many businesses in the restaurant and entertainment industries, but as I discussed last month, D&B was especially at risk with a rising burden of debt, dwindling cash, and profit margins headed in the wrong direction leading up to the crisis.
Things are improving for the better, though, right? The economy is beginning to open back up, which could mean D&B may be able to start generating some revenue again. And in the meantime, the company just finalized a fresh capital raise through the sale of 9.58 million new shares that infused it with $110 million in cash. Shares outstanding totaled 31.2 million at the end of the company's fiscal year 2019, so existing shareholders just experienced significant dilution of their stake in the company. But liquidity was an immediate need. Management had previously reported it had about $100 million in cash at the end of March after fully drawing down its line of credit, but even with stores closed, that only left it with months to go before bust.
Fresh cash buys D&B some more desperately needed time, but it's still far from a low-risk rebound bet. Investors looking to capitalize on the world eventually returning to normal -- whatever that may look like -- might give pause before jumping on this stock.
Source Fool.com
