Editor’s Note: The following is a breakdown by Seeking Alpha of Camping World’s pending IPO.
You may know Marcus Lemonis from the television show The Profit on CNBC. But you may not know that he is also Chairman and CEO of the corporation Camping World Holdings (NYSE:CWH), which specializes in camping equipment and RV parts and services through their 107 retail stores and 18 dealerships. Now he and his multibillion dollar company are gearing up for an IPO which could raise them $260 million. Although Lemonis has an excellent history of making deals with small businesses, this could be the biggest equity deal he’s ever done.
Use of Proceeds
According to the prospectus, about $200.4 million of the proceeds from the IPO will be used to pay a portion of the company’s outstanding debt and the rest will be used for general corporate purposes. There is, of course, mention of placing proceeds into investment instruments pending their use, however there is nothing of substance in the prospectus that indicates the proceeds will be used for any type of corporate development initiatives, such as acquisitions.
Their Balance Sheet Is Upside Down
Camping World has a stockholders’ deficit of $285 million. This is clearly why Camping World needs this IPO. While their debt is easily manageable, you don’t want it to get out of control. With only $39 million in cash, Camping World is running a poor cash ratio of 0.04, which means in order to strengthen their liquidity position to meet working capital needs, they will need to raise money via debt or equity. And rather than adding on to the $656+ million of long-term debt, the IPO is a good way for them to strengthen their balance sheet and increase their liquidity. If there is one thing I’ve learned from watching The Profit, it’s that Marcus Lemonis doesn’t particularly like the burden of debt on the books. And in order for Camping World to pay a reasonable and stable dividend, there is some needed improvements to their balance sheet.
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