Dave & Buster’s announced Tuesday that it has an agreement to sell up to $75 million in shares as part of an “at-the-market” equity offering program.
Jefferies, an investment bank, will serve as the sales agent. Dave & Buster’s is using the program to build its cash flow amid the COVID-19 pandemic. Jefferies will use “commercially reasonable efforts” to consummate at-the-market offering of stock within 60 days, according to an SEC filing. The eatertainment brand will pay Jefferies 3 percent commission of the gross proceeds from each sale.
As part of the agreement, Jefferies will sell shares based upon the company’s direction, including price, time, or size limits, and any other parameters set forth by Dave & Buster’s.
Before the agreement with Jefferies, CNBC reported that the brand was speaking with private equity firms about a potential stake sale. The chain was reportedly exploring an investment known as PIPE, or private investment in public equity. CNBC said such a deal could result in a buyout firm grabbing a significant stake in the company.
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The brand closed all 137 of its locations in the U.S., Canada, and Puerto Rico by March 20. As a result, 15,000 hourly employees were furloughed and management and corporate staff were reduced by almost 90 percent. The senior leadership team saw its salary cut by 50 percent and the board forewent its compensation for the rest of the year.
“We are acutely aware of the importance of doing our part as a responsible business to support social distancing and the global effort to mitigate the spread of COVID-19,” CEO Brian Jenkins said during the brand’s Q4 and annual review. “At the same time, nothing will bring me and this management team more joy than the day we reopen our stores and welcome back our team members and loyal guests so everyone can get back to working hard and having fun together.”
Dave & Buster’s stock price has dropped about 70 percent in the past three months. It fell to $4.87 per share on March 13.
As of March 31, the company had about $100 million in cash. The company suspended its quarterly cash dividend, which is expected to save $5 million each quarter, and capital spending was reduced by 70 percent. The company is spending roughly $6.5 million per week, which includes $3.3 million in rent and occupancy expenses and $3.2 million in operating expenses and G&A.
In Q4, which ended a month before the pandemic, comp sales dropped 4.7 percent and walk-in sales declined 5.5 percent. For 2019 overall, comps dipped 2.6 percent and walk-in sales decreased 3 percent.
