Virus costs three theme park chains over half their value

It's been a tough couple of weeks for the stock market. But it's been an especially tough time for people - including many fans - who hold stock in major theme park chains.

While the Disney and Universal theme parks are part of giant, multi-billion-dollar entertainment corporations, the next three most-visited chains in the United States are independent, publicly traded companies: Six Flags, Cedar Fair, and SeaWorld Parks & Entertainment. Over the past month, each of these three companies have lost over half of their market share.

Six Flags, which drew an estimated 32 million visitors in 2018 (the last year for which TEA/AECOM attendance data is available), dropped from $38.42 a share one month ago to $12.86 — a 56 percent loss.

Cedar Fair, which drew 25.9 million visitors in 2018, dropped from $53.97 a share to $17.34 — a 68 percent loss.

SeaWorld, wich drew 22.6 million visitors in 2018, dropped from $35.97 a share to $8.74 — a 76 percent loss.

As a result, Six Flags now has the largest market cap of the three companies, at $1.089 billion, while Cedar Fair is down to a $982.6 million market cap, and SeaWorld is worth just $688 million.

For perspective, Disney reported spent more on Galaxy's Edge alone than any of these entire companies are worth. If rumors are to be believed, Universal might be spending more than the current market value of Six Flags, Cedar Fair, and SeaWorld combined on its new Epic Universe theme park.

Yes, plenty of companies are losing value in the current market. The Dow Jones Industrial Average is down about 27 percent over the past month. Disney's stock is down 33 percent over that period, while Universal owner Comcast's stock is down about 17 percent. But keep in mind that one month ago, Bob Iger was still the President and CEO of The Walt Disney Company, so part of Disney's stock loss can be attributed to that. And both Disney and Universal are facing big losses at the box office due to theaters closing.

There's nothing else complicating the story at Six Flags, Cedar Fair, and SeaWorld. The market clearly does not like these companies' outlook, given that their parks are closed indefinitely and no one knows how willing - or able - people will be to pay for theme park visits once travel and crowd restrictions lift.

Yet each of these companies remain relatively capital-rich. Even if no one visits, they still own land and equipment worth millions. When capital-rich companies see their stock prices drop like this, they typically become a takeover target, as other companies with cash, or the ability to borrow, look to obtain the ailing corporation's assets.

With all three of these companies seeing their stock prices drop, however, the possibility that one of these three buys another becomes more difficult to envision. With the lowest market cap and fastest-falling stock price, SeaWorld would seem the most likely acquisition target at this point. But with market caps at or under a billion dollars, any one of the three could be an easy pick-up for big entertainment conglomerate.

Do keep in mind - for what it's worth - that if any entertainment company buys Six Flags that acquisition would trigger a clause in Six Flags' license of Warner Bros.' DC Comics and Looney Tunes franchises that would immediately terminate those rights. So Universal can't but Six Flags to get the rights to the Justice League for its theme parks. But - just sayin' here - if Warner Bros. wanted to get back into the domestic theme park business, buying one or more of these chains could give it the real estate it needs to reenter the American theme park market without having to start from scratch.

Other potential buyers, however, may look at these three firms with no intention of getting into the theme park business at all. They might see these companies as nothing more than real estate assets, with rides to be sold for whatever can be obtained. Truly, no one knows the future. But stock price drops like this suggest that it might not look much like the immediate past for these three companies.

Like it or not, Covid-19 is going to transform the American economy. Business that no one could have imagined closing will close, and businesses that no one could have imaged actually working will open and thrive. If you are fan of these theme parks, the best thing you can do for them right now is to stay home help stop the spread of this virus (remember - people with no symptoms can be carriers), hope that the virus peaks quickly, and plan a visit to these parks as soon as they reopen to help them reestablish their value, to both the public and the markets. (We will have discounted tickets for you, too.)

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