Please ensure Javascript is enabled for purposes of website accessibility

Why Dave & Buster's Stock Was Climbing Today

By Jeremy Bowman - Updated Jan 17, 2020 at 1:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the eat-and-play chain were gaining on Friday after an activist investor revealed a stake.

What happened

Shares of Dave & Buster's (PLAY -2.93%) were gaining today after an activist investor took a position in the stock, lifting shareholders' hopes for a turnaround by the struggling "eatertainment" chain. The stock was up 10.9% as of 12:26 p.m. EST on Friday.

So what

The private equity firm Kohlberg Kravis Roberts (KKR) revealed a 6.3% stake in Dave & Buster's this morning. In a Securities and Exchange Commission filing, the activist investor said it had already held talks with management about its business, operations, strategy, plans, and prospects.  The statement also said that KKR could pursue any number of moves, including a merger, reorganization, a change in the board of directors, or a sale of assets.

Dave & Buster's has not yet issued any statement about KKR's position or the discussions they've held.

The entrance to a Dave & Buster's

Image source: Dave & Buster's.

Now what

The restaurant and arcade chain has been struggling for years, suffering comparable-restaurant sales declines even as it continues to open new locations. Share buybacks have helped lift earnings per share although performance in the underlying business has been weak.

Considering those results and the company's unique brand and growth potential, it's not surprising to see an activist investor like KKR take a stake here. Some of the usual activist tools here don't seem so applicable, however, as Dave & Buster's probably wouldn't find a buyer and the company is already aggressively returning capital to shareholders.

But the company needs to find a way to drive more traffic to its restaurants because adding new games in virtual reality and other areas has not been enough. D&B has also faced competition from delivery apps and at-home entertainment like Fortnite that have made it more attractive for customers to stay home.

Investors should expect an update in the coming weeks and months, possibly in the form of board changes. At the very least, KKR's involvement should help put a floor on this struggling restaurant stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dave & Buster's Entertainment, Inc. Stock Quote
Dave & Buster's Entertainment, Inc.
$32.78 (-2.93%) $0.99

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.