No matter whose side you take in the tiff between Bruton Smith and H.A. “Humpy” Wheeler over Wheeler's departure from Speedway Motorsports, one thing is clear: Wall Street isn't happy with the company's performance of late.
Shares in the Concord-based company – which owns seven speedways, including Lowe's Motor Speedway, and wants to buy an eighth – have lost more than half their value over the past year, with the stock price dropping from about $40 last July to just above $18 Monday.
Even in today's bear market, that's a big slide. By comparison, the S&P 500 Index and other major market measures are down about 20 percent, while shares in International Speedway Corp. – Speedway Motorsports' chief rival – are down almost 30 percent from a year ago.
Both speedway owners have been tested by an economic downtown that has curbed fan attendance and spending at some NASCAR races. But Speedway Motorsports – after tracking closely with its main competitor in 2007 – saw a sharp drop in March and has yet to recover.
After a small bounce in late April and early May, Speedway Motorsports' stock has steadily declined. Wheeler retired as the company's president and chief operating officer, as well as president and general manager of Lowe's Motor Speedway, on May 22.
The sinking share value since then, Wheeler said in a recent e-mail to the Observer, is “what happens when the ‘right stuff' isn't there with investors.”
Industry analysts, however, say responsibility lies with two major moves this year: the $340 million purchase of New Hampshire International Speedway and the planned purchase of the Kentucky Speedway for more than $70 million.
“They're high-priced acquisitions,” said Joe Hovorka, a senior vice president with Raymond James & Associates in Atlanta. “The path to value to shareholders is not clear.”
Shortly after Wheeler, 69, announced his retirement after 33 years at Lowe's Motor Speedway – a few days before the Coca-Cola 600 – he said his departure wasn't entirely on his own terms.
Wheeler and Smith, 81, had discussed Wheeler's retirement for about six months, both men said, but ultimately couldn't settle differences over Wheeler's compensation or retirement date. Smith said he expected Wheeler to leave May 28, after the Coca-Cola 600.
Smith – chairman and CEO of Speedway Motorsports – also noted that Wheeler has disagreed with him in the past on such projects as building condos near Turn 1 and building the drag strip scheduled to open in September on speedway property.
Leadership changes can cause ripples in the market, analysts said. With Wheeler's departure, “you had some cloudiness to how that all came about,” said Tim Conder, a managing director with Wachovia Capital Markets.
In addition, Conder said, Speedway Motorsports didn't add to its leadership team to replace Wheeler, instead elevating Smith's son, Marcus Smith.
“Marcus is a familiar face,” Conder said, “but he is definitely not as well known and doesn't have the experience and track record that Humpy Wheeler did.”
Just as important is Speedway Motorsports' efforts to add two more speedways to the company's portfolio, Conder said. International Speedway Corp. hasn't extended itself financially in the same way this year, he said, and that company's lower debt has kept its stock price from sinking as low as that of Speedway Motorsports.
Hovorka said the $340 million cash price for the New Hampshire track is a big chunk of Speedway Motorsports' market capitalization, now about $800 million. In essence, he said, the company is paying for two NASCAR Sprint Cup race dates.
The Kentucky Speedway has no race on the Sprint Cup schedule, Hovorka said, and it's unclear how Bruton Smith plans to land a race for that venue, which is in a media market smaller than most of those of other Speedway Motorsports tracks.
“Quite frankly,” Hovorka said, “it doesn't make a lot of sense to us.”