- Build-A-Bear Workshop, Inc. (NYSE:BBW) stock price rose more than 4% in intraday trading today. That is why.
Build-A-Bear Workshop, Inc. (NYSE:BBW) stock price rose more than 4% in intraday trading today. Investors are reacting to a statement released by Dave Kanen, managing director of Kanen Wealth Management.
Kanen’s letter was sent to Build-A-Bear board members. And in the letter, it was revealed that Kanen Wealth Management and its affiliates are a major shareholder of Build-A-Bear with a 6.5% stake.
Below is part of the press release:
We obtained a professional valuation of the company-owned distribution center that suggests a sale-leaseback valuation of at least $31 million and an associated lease charge of approximately $1.8 million. dollars. BBW has the option to sell (and lease back) this asset at ~17.2x earnings and repurchase shares at ~3.2x EBITDA, which would be approximately 11% earnings per share accretive .
Additionally, BBW today has significant net cash and is expected to grow to approximately $75 million in net cash over the next 6 months. That is, at a 15% premium to today’s price, BBW could withdraw 6.2 million shares simply by monetizing its distribution center and returning its net ending cash. year to shareholders through share buybacks. This 6.2 million share buyback would allow shareholders to own 67% more of BBW’s business (outstanding shares reduced by 40%) and would be highly accretive. Above all, it would leave BBW with a very strong balance sheet, a continued ability to reinvest all future FCFs back into the business, and in our view this is unequivocally the best way for the business to allocate its capital to create the value.
Additionally, Kanen’s letter criticized the results of the company’s CEO, Sharon John. And Kanen’s letter suggests the company should seek a new CEO.
This is an additional part of the letter:
“We have made many recommendations over the past 3 years, both when I was a director and an investor. Some of them are: 1) significant entry into the pet toy market (an opportunity to multi-billion dollars) 2) a third-party retailer relationship with a partner that has hundreds of locations for a “store-within-a-store” like Chuck E. Cheese 3) sale-leaseback with a large tender and 4) partnerships with primary education providers.
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