Callaway May Sell Its TopGolf Stake Sooner Than Expected

(Bloomberg) -- Callaway Golf Co. may be selling its stake in TopGolf sooner than expected after omitting words about the franchised party venue’s long-term value in a slide deck published ahead of this week’s anticipated investor road show, according to Stephens.

Shares jumped as much as 2.3% on Wednesday as analyst Daniel Imbro said the missing language indicated a faster-than-expected “monetization effort,” in a report.

“Previously, management’s commentary suggested that TopGolf was complementary to the long-term business and additional investment could be a use of strengthening [free cash flow]. Commentary in the current slides removed that wording,”Imbro wrote.

A sale of its stake in the venue, which aims to make the sport more accessible, was always a part of the narrative. However, Imbro said the slides marked a shift in tone.

Callaway Golf has a roughly 14% stake in TopGolf. Imbro’s sum-of-the-parts analysis suggests that TopGolf could be worth about $3 per share, based on a $290 million valuation gleaned from a December 2017 funding round. But that wouldn’t account for its expanded footprint. Adding in the new locations at a value of 70% per unit, TopGolf could be worth just under $4 per Callaway share, Stephens said.

Imbro maintains an overweight rating on the stock and price target of $21.50.

To contact the reporter on this story: Crystal Kim in New York at ckim426@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Jennifer Bissell-Linsk, Scott Schnipper

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