Is Topgolf tracing to an IPO?

The Arizona Republic

Is Topgolf tracing to an IPO?

Golf

Is Topgolf tracing to an IPO?

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Topgolf, the Dallas-based entertainment company that marries the traditional driving range experience with cutting edge technology at nearly 60 multi-tiered venues around the world, has selected Morgan Stanley, JP Morgan Chase & Co., and Bank of America, to assist in a potential initial public offering that could value the company at close to $4 billion, Bloomberg reported.

In October, Reuters reported the privately-held sports and entertainment giant had been in talks with underwriters about a possible IPO in 2020.

The four lead investors in Topgolf International are WestRiver Group, Callaway Golf Company, which owns a 14 % share, Carolina Hurricanes owner Tom Dundon, and private equity firm Providence Equity Partners, according to the company’s website.

Topgolf has $525 million in outstanding debt, according to Bloomberg data.

A two-deck range bay used at Topgolf.

Casey Alexander, a longtime industry observer and senior vice president and research analyst at Compass Point, gives Topgolf an equity valuation that equates to $5 per Callaway share, which would require a market cap of $3.57 billion.

“By all accounts that we have seen going back to presentations from Entertainment Property Trust, the average Topgolf store does $6-8 million in EBITDA, so the valuation of $5/Callaway (ELY) share for the value of ELY’s 14 % stake in Topgolf seems well justified if not too low,” Alexander wrote in a recent research report.

Front Office Sports recently wrote about Swing Suite, an offshoot of Topgolf that is described as “like having your own virtual driving range/video game center/sports bar,” and quoted Susan Anderson, an analyst at B. Riley FBR, who estimated Topgolf’s valuation at over $3 billion and said, “Should Topgolf continue on its current growth path, this could prove conservative.”

In an October note to investors, KeyBanc estimated Topgolf could be worth more than $5 billion.

Golf balls being retrieved at the Topgolf location in Scottsdale, Arizona. Photo by The Arizona Republic

Topgolf already has locations in the United Kingdom and Australia and has plans to open in Canada, Mexico and the United Arab Emirates, and expects continued growth in the U.S. In 2018, more than 17 million people visited a Topgolf venue.

A 2018 National Golf Foundation study proclaimed that Topgolf could be the most important feeder system to the game since the caddie program.

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