Callaway Analyst: Topgolf Worth More Than Previously Thought

Bloomberg reported Monday that Topgolf International, an operator of a party-themed golf driving range, is looking to list itself on a public market at a $4 billion valuation.

Benzinga · 01/08/2020 12:38

Bloomberg reported Monday that Topgolf International, an operator of a party-themed golf driving range, is looking to list itself on a public market at a $4 billion valuation.

Topgolf is reportedly working with bankers to plan a potential IPO in 2020, sources told Bloomberg. The company is backed by a private equity investment from Providence Equity Partners along with Callaway Golf Co (NYSE: ELY) and other minority investors.

Topgolf has locations across the U.S., U.K., and Australia with new locations opening across Canada, Mexico, and the United Arab Emirates.

Why It's Important For Callaway Golf

While Topgolf has $525 million worth of outstanding debt, a $4 billion is still larger than previously estimated, Stephens analyst Daniel Imbro wrote in a note. In fact, Callaway owns around 14% of Topgolf, which would not be appropriately reflected in its stock at current valuation.

The valuation and capital structure of Callaway's stake in Topgolf is worth around $5 per share, but a sum-of-the-parts valuation model assumes just $4 per share, Imbro said.

In addition, recent changes "to the verbiage" in Callaway's investor deck implies a monetization event would unlock shareholder value.

As is always the case, reports of an upcoming IPO may not necessarily materialize as it depends on multiple internal and external factors.

Callaway's stock closed Tuesday's session down 2% at $21.53 per share.

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