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(Awright, so why would I waste this precious space on a company whose stock has already fallen by 50% in the last year when there are so many more compelling, important, relevant stories? Because if for some reason it can't raise more cash, and it can't do more acquisitions, and it can't generate something more than mid-single digit growth on a store-by-store basis, then at some point -- even at today's price -- investors will wish that they had paid attention.)

From teed-off investor file: Anybody buying into

Family Golf Centers


or any golf company a year ago was buying into the Tiger Woods effect on golf. He was hot. Golf was hot. Family Golf Centers was hot. Well, Woods is still hot, golf is still hot, but the stock of Family Golf Centers is anything but hot, having lost half its value over the past year.

Turns out, according to a new industry survey, golf has been better at drawing spectators than new players. According to a new PGA-commissioned study, rising revs at the likes of

Callaway Golf

(ELY) - Get Callaway Golf Company Report

weren't because more people were playing golf, but because golfing goods companies were raising prices, as players flocked to a new generation of Big Bertha-like products. That was fine until the market became over-saturated with new products. Now the stocks of Callaway and the others look like has beens, as does the stock of any other company that capitalized on the boom.

Which brings us to Family Golf: If all goes its way, it'll convince you and me to turn golf into a form of family entertainment (C'mon, hon, c'mon kids, let's go shoot a bucket-o-balls) that competes head on with bowling and the movies.

Don't laugh. Early on, after Family Golf buys, renovates and promotes a driving range, sales definitely increase. But then, as the initial enthusiasm about the new neighborhood fad falls, so do sales. The company and analysts say that comparing revenue growth, year over year, is meaningless because comps will naturally fall as newly acquired ranges join the increasingly mature mix of ranges. Even so, by last year's third quarter, comp revenues tumbled by roughly half, to 9%, from a year earlier. What's more, CEO Jeff Key says that if all goes well, growth of 5% is "what we've targeted for long-term growth internally" at mature centers. In other words, "If we stop making acquisitions, growth will be 5%," he concedes. (Give this guy an 'A' for candor.)

Five percent is hardly what Wall Street expects from a growth company, and such paltry growth is what often happens to rollups after the merger music comes to a halt. That's why short sellers are drawn to rollups like Family Golf, funeral homes and even used car lots. They're usually more of a trade, on the hype, than an investment on the future. They tend to be greater-fool theory types of investments. To keep the story going requires a steady stream of acquisitions; Family Golf's target is 30 acquisitions a year over the next two years. But there are only so many golf ranges, funeral homes or used car lots that can be acquired (which is why Family Golf is now branching into the exciting world of ice rinks.) And such ambitious acquisition strategies require a bottomless pit of money and repeated trips to the bank.

That's not a problem for Family Golf this year; through debt and cash, it can easily handle the $80 million or so it believes it needs to complete its acquisitions. "I'm more worried about the year 2000," Key says. He thinks "serious lenders" will be available if the company continues to turn in good results and interest rates remain stable. But a recent attempt to raise cash through a private junk-bond offering, as a hedge against the future or something the company knows, was quashed by large investors who didn't like the idea of the company putting needless interest expenses on the balance sheet when the money wasn't needed.

Family Golf has also insisted that its cash flow will be sufficient to fund growth. It has said that, based on a variety of assumptions, it believes it can generate upwards of $50 million in cash flow from operations. However, as of the end of the first nine months cash flow from operations was a mere $4.8 million, leading one money manager who is short the stock to say, "Show me the cash flow."

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But despite these issues, all eight analysts covering the company rank it the equivalent of a strong buy. Five, however, were named as underwriters on the company's last prospectus for $100 million, when the stock was around 25; it's now closer to 16. (The more underwriters you name, the less likely they are to pull the plug.)

Then there's the issue of Family Golf's auditors: Despite a market cap of $423 million -- the size when most companies have gone to the Big Five -- Family Golf is audited by New York's

Richard Eisner

, a third-tier firm that claims to have at least 10 public clients the size of Family Golf. Key says his company has stuck with Eisner because the chief executive, Dominic Chang, "is loyal to a fault."

Loyalty is fine, and a Big Five certainly doesn't guarantee quality auditing. (Do


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ring a bell?) But perception is everything, especially for a public company that has made so many acquisitions, and taken so many charges, that it's hard to get a firm grip on its true business model. It's just one more reason for skeptics to take a swing at its strategy.

Short Positions

  • Biotech binge: Every now and then this column checks in with David Tepper of Tepper Capital in San Francisco, who specializes in closed-end funds. Back in January 1995 he was quoted in my old San Fran Chron version of this column singing the praises of a few healthcare closed-end funds, which wound up rising 50% to 60% that very year. "There are some signs the biotech sector is starting to come alive again," he says, citing Amgen's (AMGN) - Get Amgen Inc. Report recent blowout earnings and a few mergers. That has forced him to refocus on the group and those same funds, especially H&Q Healthcare (HQH) - Get Tekla Healthcare Investors Report and H&Q Life Sciences Investors (HQL) - Get TeklaLife Sciences Investors Report. H&Q Healthcare has a current net asset value of $20 a share vs. a share price of 15 1/16. H&Q Life Sciences' NAV, meanwhile, is around $16.55 a share vs. a stock price of 12 5/8. "Discounts on these two funds, now in the 25% range, are as big as they have ever been," he says. "If small-caps ever come back in favor, these two funds could move big time." If history repeats itself, that is, and right now history is not a good hanger for a hat.
  • You tell me, should I call the regulators? In a recent column I mentioned how I bought a coffee maker through on Dec. 30. I chose because its appeared to pride itself on selling products below cost, and its price on this product was sharply lower than I could find anywhere else online or off. It was supposed to be delivered within seven to 10 working days. It never arrived, so I worked myself through the company's inept customer service department and finally, after trading a few emails, I received this email from a customer service representative with the initials K.B.: "We are currently researching the status of your order. The appropriate vendor has been contacted and we are awaiting a response. We will email or call you within 24 hours with the exact status of your order." I wrote back: "The clock is ticking." A few hours later, K.B. wrote: "I am pleased to tell you that after talking with our vendor, your White 12-Cup Water Filtration Coffeemaker will ship no later than Thursday 1/28/99. But it may ship earlier. If you wish to receive this product, do nothing and it will arrive by Friday 1/29/99, as we have made arrangements for overnight shipping." I wrote back: "I've marked my calendar." You can see this one coming many miles away: Friday was Jan. 29. It has come and gone, but my coffee maker hasn't arrived. This time I wrote: "Should I start calling attorney generals offices?" So far, no reply. Meanwhile, has had the use of my money for one month without ever delivering on its end of the bargain. And based on emails from others, I'm not alone. (Maybe that's why Compaqundefinedreally lowered the price of its deal to acquire Maybe they took a look at the books!)

Herb Greenberg writes daily for In keeping with the editorial policy of TSC, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnerships. Greenberg writes a monthly column for Fortune and provides daily commentary for CNBC.

As originally posted this story contained an error. Please see Corrections and Clarifications.