ClubCorp Falls After Short Seller Targets Golf-Club Operator

  • Hedge fund Kerrisdale cites shrinking participation in golf
  • ClubCorp runs mid-tier clubs that may be vulnerable, firm says

ClubCorp Holdings Inc. shares declined after an attack by short seller Kerrisdale Capital Management, which says the country-club operator is worth less than a quarter of its current value.

Participation in golf is shrinking, particularly among younger players, and operating golf clubs is a capital-intensive business, Kerrisdale said in a report released on Thursday. That’s left ClubCorp vulnerable, the firm said. The company, which had a market value of about $866 million as of Wednesday’s close, is the largest operator of private country clubs in the U.S.

ClubCorp fell 9.2 percent to $12.05 as of 10:07 a.m. in New York on Thursday. Even before the tumble, the stock was down 27 percent this year. The Dallas-based company, which also runs sports and alumni clubs, has posted losses in two of the past three years.

Most clubs aren’t run for profit, meaning customers often have relatively cheap alternatives, Kerrisdale said. The large proportion of mid-tier clubs in ClubCorp’s portfolio make it particularly vulnerable in a recession, when members could defect to public golf courses, according to the firm. A high debt load and state audits over refundable deposits also may lead to “a potentially fatal debt burden,” Kerrisdale said.

Short sellers like Kerrisdale bet that a stock will decline in value and rely on research to back up their case. The firm previously went after Sage Therapeutics Inc., saying in March that the biotechnology company’s leading drug candidate was likely to struggle. That stock fell 13 percent in the wake of that report, though it has rebounded in the past two weeks.

ClubCorp wasn’t immediately available for comment.

Analysts surveyed by Bloomberg have 11 buy ratings, one hold and no sell recommendations on the company.

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