‘Going Dark’: Drive Shack Plans to Delist from NYSE, Focus on Growth Without ‘Undue Distraction’

Dallas-based Drive Shack Inc., creator of the modern mini-golf brand Puttery, intends to voluntarily delist from the NYSE. "Going dark" will allow management and employees to focus on running the business and achieving growth—without the distractions of being a publicly traded company, Drive Shack says.

The company's entertainment venues and "competitive socializing" are a driver of that growth. Puttery has expanded to five locations since its debut in North Texas in 2021.

Dallas-based Drive Shack Inc., which owns and operates golf-related leisure and entertainment businesses, plans to voluntarily delist from the NYSE.

In a news release this week, the company said it intends to “go dark” on the exchange after receiving a notice that its securities were not in compliance with NYSE standards.

Drive Shack’s board—along with management and outside counsel—determined that delisting is the best path forward. The company points to its “current inability to realize the traditional benefits of public company status” and expected cost savings.

Despite that lack of benefits, the company said, “we incur all of the significant annual expenses and indirect costs associated with being a public company.” Indirect costs include the professional fees of lawyers and accountants, as well as printing, mailing, and other costs necessary to comply with SEC reporting and compliance requirements.

An “undue distraction”

Drive Shack is the company behind the Puttery brand, a modern spin on mini-golf, which debuted in North Texas at The Colony’s Grandscape in 2021. Puttery has since expanded to five locations.

The delisting doesn’t “preclude opportunities for the company to achieve significant growth,” Drive Shack noted in a FAQ that elaborated on the news announcement.

“Going dark” will allow management and employees to focus on running the business—without being distracted by the requirements of being a publicly traded company.

Per the document: 
“Following going dark, being a non-reporting company will not preclude opportunities for the Company to achieve significant growth. Furthermore, the reduction in time spent by our management and employees complying with the requirements applicable to SEC reporting companies will enable them to focus more on managing the Company’s businesses and growing stockholder value, with a focus on long-term growth without an undue distraction by short-term financial results and stock price movement.

The company noted that “low trading value, and the resulting low-volume of trading, limits our securities’ liquidity, affects our ability to raise capital from the public markets, effectively use our securities as transaction consideration, attract interest from institutional investors or market analysts and otherwise enjoy the traditional benefits of being a publicly traded company.”

According to Morningstar, Drive Shack stock was trading in a range of $0.18 to $0.21 on Thursday; the year range is $0.15 to $1.97.

The company expects its securities to be delisted from the NYSE on January 3, 2023.

After going dark, the company’s shares will no longer be publicly traded in a regulated market. The company plans to apply to have its common stock quoted on the OTCQX platform, but there is no guarantee that this will happen or that the securities will be traded on any market, Drive Shack noted in its FAQ.

Drive Shack Inc. portfolio companies

Drive Shack Inc., which relocated its headquarters to Dallas in 2021, has a brand portfolio that includes Drive Shack, Puttery, and American Golf.

The company claims its traditional golf roots in the American Golf brand. It owns, manages, and leases golf courses and country clubs across the U.S. The 50-year-old company has more than 70 facilities currently under management, per its website.

The company’s focus has expanded to golf-related entertainment and what it refers to as “competitive socializing.”

Hana Khouri [Photo: Michael Samples/Dallas Innovates]

Drive Shack Inc. President and Chief Executive Officer Hana Khouri recently told Dallas Innovates that “entertainment venues are an important growth driver” for Drive Shack Inc.

Puttery, which puts a high-tech spin on putting, is a modern mashup of mini-golf and immersive experience. Puttery opened the first of its indoor concept venues in The Colony at Grandscape in 2021. The two-story space includes themed nine-hole golf courses, swanky lounges, and multiple bars. It’s now opened locations in Charlotte; Washington, DC; Houston; and most recently, Chicago, which opened last month.

Drive Shack opened its first namesake location in Orlando in 2018. That site was something of a beta test for the next generation of its entertainment golf venues, the company has said. In 2019, it opened three Drive Shack “GEN 2.0 venues” in Raleigh, Richland, and West Palm Beach.

Q3 2022 earnings

In a third-quarter earnings release, Drive Shack reported total revenue of $89 million—a 16% increase compared to the same period in 2021. The company said that growth was driven by strong event sales and new Puttery venues. Puttery venues contributed $6.6 million to overall revenue. American Golf and Drive Shack, saw respective increases of 51% and 22%.

In the release, Drive Shack Inc.’s Hana Khouri noted event revenue for Q3 was $3 million higher year over year: “We have seen the demand for future events across both the corporate and social categories continue to rise, which will translate into strong revenue results in the back half of this year,” Khouri said at the time, adding that Drive Shack continues to “gain a clear proof of concept with our Puttery brand.”

The company reported adjusted EBITDA of $7.0 million for Q3 2022 compared to $3.4 million for in Q3 2021. “The change to last year was primarily related to the addition of new Puttery venues and a reduction in overall general corporate expenses, including payroll,” according to the earnings release.

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