Dave & Buster’s Inc. shares plunged 26.4% in Thursday trading after investors grew nervous about the possibility of the entertainment company filing for bankruptcy.
Dave & Buster’s
included “going concern” language in a 10-Q filing dated September 10.
Between March 14 and March 20, all 137 Dave & Buster’s locations were closed due to the coronavirus pandemic.
Dave & Buster’s initially furloughed nearly all of its employees and, as of August 2, had reached 92 rent relief agreements, which includes rent deferrals. As of September 4, 52 locations were closed, according to the filing.
On September 10, the company reported an 85% decline in second-quarter revenue, to $50.8 million.
“These developments have caused a material adverse impact on the company’s revenues, results of operations and cash flows, including the company’s ability to meet its obligations when due,” the filing said.
“These conditions raise substantial doubt about the company’s ability to continue as a going concern for a period of one year from the date of the financial statement are issued.”
” We continue to assume that Dave & Buster’s lenders will again grant covenant relief, especially given visibility into recovering EBITDA at that time as the company emerges from COVID crisis,” analysts wrote.
Truist rates Dave & Buster’s stock buy with a $22 price target.