Bruton Smith and his Sonic Financial group have made a bid to acquire all of Speedway Motorsports Incorporated (SMI) shares that are not already owned by the Smith family. In return that would allow the Smith’s to take SMI off the public market and make it a private company.
This news come a couple of months after NASCAR announced they were exploring the same move with ISC. Is this a coincidence? I think not.
So what does all of this mean?
Well, the stock market can be a confusing place for a lot of people. But essentially what the Smith family has done is offer to buy back every share for $18 a share. That’s $4 more than what the shares were trading for Wednesday morning. Meaning investors would make money off the deal assuming they didn’t buy in at a higher price. If they did? Well, it sucks to be them. Like a casino, you took a gamble.
Why would the Smith family want to buy back all the stock?
The thought process behind this move is to avoid upset stockholders if the price were to tank. It’s also to avoid litigation (being sued) if/when NASCAR cuts tracks from the schedule starting in 2021. If that were to happen there’d be a drop in overall attendance and thus revenue which the company would then have to report. By doing this they have no one to report to other than Bruton and Marcus Smith and whoever else is on the board. No more shareholders to please would be less of a headache for them.
Can The Smith’s Afford This?
Right now the family owns around 71% of SMI’s stock. A buyback would cost $212.8M which they would pay in cash and borrowing under new debt facilities. Essentially that just means SMI is taking on new debt.
In short they can definitely afford it. Bruton Smith is worth an estimated $1B and son Marcus clocks in at a cool $400M. Sooooo yeah money is not an issue here.
Overall, it’s a really smart business move on their part. Now they’re free to do whatever they want without the fear of angering their share holders. The downside, there is no money coming in from the shareholders. All capital will now come from SMI revenue, the Smith’s or Sonic Financial. That could be a negative down the road especially if they have any aspirations of building any more facilities.
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