What happened

Shares of Dave & Buster's (NASDAQ:PLAY) were gaining today after the private equity firm Kohlberg Kravis Roberts (KKR), the same activist investor that had first taken a stake in D&B in January, upped its investment in the struggling "eatertainment" chain from 6.3% to 12.7% today. 

As a result, Dave & Buster's stock finished the session up 8.8% after gaining as much as 13.5% earlier in the day.

The entrance to a Dave & Buster's

Image source: Dave & Buster's.

So what

The eat-and-play chain had been hammered by the coronavirus as investors have bet that Americans will avoid crowded places, which includes locales like Dave & Buster's, whose venues provide food, beverages, a place to watch sports, and, most importantly, games. Before today's gains, the stock had plunged more than 35% since the sell-off began on Feb. 24. 

Today's gains also come as the broad market rallied, with the S&P 500 finishing up 4.2% as investors reacted positively to former Vice President Joe Biden's victory in most of the Super Tuesday contests last night, and as Congress approved about $8 billion to help stop the spread of the coronavirus, indicating the government is getting serious about the outbreak.

As for Dave & Buster's, KKR's increased stake shows that the company sees value in the stock at its current price and is doubling down on its previous bet. Back in January, it said had held talks with management, though it's unclear what the firm's intent or strategy is with Dave & Buster's.

Raymond James Brian Vaccaro also said in a note that he had previously envisioned a leveraged buyout scenario in which Dave & Buster's stock was taken private in the mid-$50 range, though that calculus may change with the coronavirus threat. 

Now what

Investors haven't yet heard any details from KKR or the restaurant chain  about what the activist's plans are. Dave & Buster's hasn't publicly sought a buyer or announced that it's seeking strategic alternatives. Near a five-year low before today's surge, the stock was starting to look like a bargain, but management is still struggling to turn around the company's performance as comparable sales have been consistently falling.

Investors should look out for more information on KKR's approach when Dave & Buster's reports fourth-quarter earnings in a few weeks.