WPT Enterprises, World Poker Tour, ‘Almost’ A Value Stock (WPTE, LACO)

If you have channel surfed on any Saturday afternoon, you’ve probably seen one version or some variation of "The World Poker Tour."   This is owned by WPT Enterprises Inc. (NASDAQ:WPTE), or at least it is a joint venture according to the http://www.worldpokertour.com/company/ website with CEO Steven Lipscomb and Lakes Entertainment Inc. (NASDAQ:LACO).   

WPT Enterprises is a majority owned subsidiary of Lakes Entertainment.  It has also been hitting the list of 52-week lows for some time now almost daily and April was the last time it saw its stock post gains from the prior month’s close.  Lakes is not at 52-week lows, but at $9.80 it is also in the lower-half of the $8.00 to $13.47 52 trading range over the last 52-weeks.

WPTE is organized into three divisions: WPT Studios, WPT Consumer Products, and WPTCorporate Alliances.  The company came public in August 2004 and traded over $20.00 for some time throughout 2005.  That was at the top of the poker craze.  Shares haven’t seen that since and no one expects them to go back any time soon.  The company loses money and is expected to lose money in this year and next by the tiny group of analysts that cover it.

As of its last balance sheet on July 1, WPTE had net tangible assetsafter backing out the fluff and backing out the liabilities of $38.89million.  With a $55 million market cap it trades at 1.414 times bookvalue.  It has to be kept in mind that the balance sheet has been andis expected to keep shrinking each quarter and calling for a "nearingbook value" isn’t exactly a fair statement when addressingmajority-owned subsidiaries.  That is why the value situation is listedas "Almost."

Lakes has north of a $400 million market cap and has more than enoughassets to acquire this if it stays down or gets worse AND if it deemedthat it really wanted to.  But most likely things would have to getworse for WPTE shares and they’d have to stay that way to shakeoutshareholders that own it from higher prices.

The September short interest according to NASDAQ in WPTE was 467,176shares, roughly 15.6 days-to-cover.  The float is only about 6.2million shares and it has 20.49+ million shares outstanding.

This is a majority-owned subsidiary, and that makes the companyessentially a tracking stock at the mercy of the parent’s management.That management is also quite autonomous if you are viewing this as howshareholders ultimately have to go along without as much say as inother companies.  We do not value majority-owned operation in the samelight as others may, but at some point and if the situations remainstatic there will at least be retail investors that look to buy this ifit gets too much weaker.

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.