One of this year's roughest roller-coaster rides caught an uphill on Tuesday. Shares of Six Flags Entertainment (FUN 4.33%) rose 18% after a group of activist investors -- including Jana Partners and Kansas City Chiefs star tight end (and fiancé of Taylor Swift) Travis Kelce -- announced a desire to shake up the company after amassing a 9% stake in the country's largest amusement park operator.
Six Flags stock had plummeted 55% before Tuesday's spike, one of the 20 largest publicly traded companies to surrender more than half of their market value in 2025. If you're an executive at Six Flags, the pop this week is more bitter than sweet. It's a sign that the market wants anyone but you running the business.
Activists storming the turnstiles didn't really take anyone calling the shots at Six Flags by surprise. Its CEO, executive chairman, and lead independent director had all recently announced that they would be stepping down before the end of this year. Change was coming.
Change is coming, whether it's from this week's activist group or something else. You don't need to look at a stock chart to see that this is a good thing.
NYSE: FUN
Key Data Points
Buckle up for the ride
The combination of Six Flags and Cedar Fair in the summer of last year was initially inspiring. Six Flags brought the more recognized brand, as Cedar Fair always sounded more like a mail order business for home decor. Six Flags also brought superior intellectual property licensing deals, ambitious season pass offers, and a knack for efficient offseason buildouts of new thrill rides to the table. Cedar Fair's calling card was its operational excellence, along with its collection of distinctive, well-maintained gated attractions.
The first step -- sticking with Six Flags as the corporate moniker but keeping Cedar Fair's F-U-N ticker symbol and CEO at the helm -- was spot on. Nearly everything else has been a misstep.
Enthusiast-alienating pricing moves, trimming park hours, and white-flagging assets are disheartening. This "best of breed" combination has turned into a "best of bleed" abomination for park goers and investors alike. Since the merger closed on July 2 of last year, shares of Six Flags had fallen 60% through Monday's close.
Image source: Getty Images.
Some restraints are cumbersome
This isn't the first time that Jana Partners brings a star athlete to the activist table. It joined forces with Dwyane Wade and CC Sabathia three years ago in its fight for change at Freshpet (FRPT +4.55%). The two parties settled their proxy vote battle a year later, but this should be an easier fight. Freshpet makes dog food. Six Flags is in the doghouse.
Investors should still approach this situation with caution. The combination of Six Flags and Cedar Fair hasn't lived up to Wall Street expectations, but it doesn't mean that an activist group has some magical elixir. It's not as if Kelce's fiancée will announce a five-year residency at Six Flags Magic Mountain.
What if amusement parks are becoming as transitory as the old-school trolley parks were? What if the digital future is changing the way young thrill seekers socialize and brandish their virtual white knuckles? Jana and Kelce may have enough ammo to give Six Flags a stay of execution, but sometimes a stay is just a delay to the inevitable.
Regime change at the amusement park operator is going to happen anyway. Analysts see revenue and earnings declining slightly for the telltale summer quarter that it will report next month.
Management has had more than a year behind the wheel and almost two years of game planning what to do once they got behind the wheel. What happened to the nine-figure cost-shaving synergies? What happened to the value proposition and benefits of the combination?
This is the ideal soil and climate for a successful proxy battle. Investors should still be prepared for a reality check. Sometimes, old questions get answered -- with new ones that still go unanswered.
