NEW YORK (TheStreet) -- Shares of ClubCorp Holdings (MYCC) are slumping by 5.5% to $12.54 on heavy trading volume late Thursday morning, after short seller Kerrisdale Capital Management said that the country club owner and operator is worth, at most, 80% less than its current price.
The Dallas-based company is heavily indebted and does not generate enough cash to justify more than a negligible equity value, the private investment firm said in a 25-page report released today.
Golf participation, rounds played and sales of golf equipment have all trended down over the past decade, especially among the younger players, the firm noted. Additionally, operating golf clubs is a capital intensive business. This has left the company vulnerable, Kerrisdale said.
"While the premise of ClubCorp's roll-up model is that greater scale leads to better returns, most golf-course costs are inherently local and thus difficult to centralize, as attested by ClubCorp's own mediocre earnings and stagnant margins," the firm wrote.
Kerrisdale also cited low margins, weak membership growth and a "never-ending" succession of capex projects.
The firm has a short position in ClubCorp and stands to benefit if the share price falls.
Last month, the firm said it had shorted Sage Therapeutics (SAGE) stock and that the biopharmaceutical company's experimental drug would likely fail in an important late stage study. The stock fell following the report.
About 1.76 million of the company's shares were traded so far today, above its average volume of 635,816 shares per day.
Separately, TheStreet Ratings Team has a "Sell" rating with a score of D on the stock.
The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: MYCC