Six Flags: It's Gates vs. the Shorts

This Bill Gates duel isn't about Microsoft. It's over the fate of Six Flags (PKS ), the theme-park operator: The bears have shorted 7.3 million shares, or 8% of the stock. Meanwhile, Gates has upped his 8.6% stake in Six Flags to 10.2%, through his private investment fund, Cascade International, according to an Aug. 23 filing with the Securities & Exchange Commission. Cascade took advantage of Six Flags' 57% plunge on Aug. 12--from 11.86 to 5.06--when the company reported that second-quarter earnings fell below estimates and 2002 profits would miss forecasts. Cascade chief Mike Larson didn't return calls. The stock is now 4.80.

The steep decline was an "overreaction," says Richard Read, an analyst at Crédit Lyonnais Securities (USA), who rates Six Flags a buy, with a 2002 price target of 11.50 a share. With credit or liquidity not an issue, Read thinks the company's asset base and long-term growth prospects are in place. The shorts, on the other hand, are convinced that Six Flags, with 37 parks in the U.S., Canada, Mexico, and Europe, will continue to see a slowdown in attendance because of the sluggish economy and travel fears since September 11. Park visits are 7.5% below last year. Justin Sebastiano of Value Line, who is down on the stock, warns that earnings may remain erratic. Erratic or not, few have made money betting against Bill Gates.

By Gene G. Marcial

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