Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 23, 1995 TAG: 9502230044
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
DATELINE: LENGTH: Medium
The profile of a stock investor is going to get grittier.
Some Roanoke-area stock car racing fans are preparing to buy stock in the company operating the Charlotte and Atlanta motor speedways. Shares go on sale Friday morning on the New York Stock Exchange. The opening price, to be set late today, is expected to be about $17 per share.
The buyers say they have a gut feeling they're getting a good deal.
But a university business professor who is familiar with the company raised a yellow flag, saying the investment carries risk.
After a series of profitable years, Speedway Motorsports Inc., headed by track owner O. Bruton Smith, will sell 4.5 million shares in the long-private company. The Concord, N.C., firm expects to raise $62.3 million in the stock offering and will use the proceeds to pay debts and add seating at the tracks, the site of eight NASCAR races annually.
"It's going to be a hot item," said John Largen of Roanoke, a race fan who has enjoyed the roar of the engines and the smell of the exhaust since childhood.
Largen, 65, a semiretired bus driver, said he planned to withdraw $1,700 from an individual retirement account and buy 100 shares of Speedway Motorsports. He said he'll spend only what he can afford to lose, but he is confident his money will grow because of stock racing's popularity.
Others share his sentiment. The stock "is something I would definitely be interested in," said Sam Campbell, a Martinsville businessman who converts trucks for racing and has owned more conventional stocks before.
"Initially, we see a lot of interest in the stock," said Tyler Pugh, branch manager and senior vice president at the Roanoke office of Wheat First Butcher Singer, a stock brokerage helping underwrite the stock sale.
Tim Largen, John Largen's son, who works as a financial consultant at Wheat First in Roanoke, said some of the interest stems from racing's widespread appeal.
"It's more driven by emotion rather than by how the stock may or may not do," the younger Largen said. "They just wanted to own a part of it."
Pointing to the 60-page prospectus which discloses important information about the stock and company, he said, "I can tell you a lot of folks will not read through that." Rather, many race fans probably read about the offering in a recent issue of Winston Cup Scene, a popular racing tabloid.
The stock is what is known as a speculative investment, meaning it is to be bought on the expectation that shares will go up as the company's fortunes improve and produce a return when they are sold, said Kenneth M. Eades, a faculty member at Darden Graduate School of Business Administration at the University of Virginia in Charlottesville.
Stockholders won't receive a dividend, or regular distribution of the company's earnings, which often is the norm with companies selling stock for the first time, Eades said.
It also is not unusual for a company to pay off debts with proceeds from its first stock sale, Eades said. Speedway Motorsports would turn over $47 million of the $62 million to banks, the prospectus said. That makes good sense, Eades said, because interest payments of more than $4 million a year have reduced earnings.
The company has had plenty of money with which to pay its debts. After accounting for interest and taxes, it earned $10 million last year on revenues of $64.5 million.
Events sponsored by the National Association of Stock Car Auto Racing at its tracks consistently sell out, the reason seating will be increased this year to 110,132 seats at Charlotte and 100,953 seats at Atlanta, according to the prospectus.
Eades noted that Smith, 67, will retain control of the company and the titles of chairman and chief executive officer. He also owns a Ford dealership and a management consulting company, Sonic Financial Corp., which provides management services to his track businesses and has received loans from the tracks during recent years totaling $29 million. Eades noted that Smith recently decided to forgive those loans.
As for the sport's future, crowds at major races have swelled 10 to 20 percent per year nationally, boosting track owners's revenue from ticket, souvenir and advertising sales and television contracts, according to a study by Goodyear Tire and Rubber Co. quoted in the prospectus.
Keywords:
AUTO RACING
by CNB