I've been long shares of Adams Golf (NASDAQ: ADGF) for some time and, so far, it hasn't provided the returns I had hoped -- to put it mildly. That's probably largely attributable to broader economic malaise but, nevertheless, shareholders have seen the market value of their shares decline rapidly and they're lost more than 90% of their value since the company's IPO in 1998.That makes the timing of founder Barney Adams' book The Wow Factor: How I Turned One Great Idea and My Unbridled Enthusiasm into a Golf Revolution a little strange.
The book is a reasonably entertaining look at how Mr. Adams, a former Corning Glass engineer, battled adversity to make Adams Golf the largest golf company IPO in history on the strength of a revolutionary fairway wood that he had designed.
The problem with a Barney Adams inspirational book is that, from a business perspective at least, Adams Golf could hardly be considered a success, except in the sense that it raised a boatload of money through its IPO, but that led to a class-action lawsuit. Since inception, Adams Golf has lost more than $34 million, and shareholders have lost their shirts. The company has made Mr. Adams a rich man but, unfortunately, it's been at the expense of shareholders. And the looting continues: Mr. Adams was inexplicably paid $319 thousand for his role as chairman of the board in 2007. I wonder how many thousands of dollars per ceremonial banging of the gavel that is!
I have tremendous respect for Barney Adams' entrepreneurship and determination in getting the company off the ground, and his book is a worthwhile read for entrepreneurial upstarts. It's a shame that his commitment to realizing shareholder value doesn't match that.
How can Mr. Adams deliver value to shareholders? It's easy: the stock is currently trading at a discount to its net current assets and, with growing sales and a leadership position in the all-important hybrid club category, Adams Golf could probably be sold to a larger company for a large premium to its current share price. Click here to read my analysis of the Cleveland Golf sale and how it relates to Adams. Full Disclosure: Zac Bissonnette is long shares of Adams Golf.
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