The chief executive's letter, released after Friday's close, commits to a fix for Goliath and similar coasters and a review of every ride across the chain. It gives no cost, no timeline and no reopening dates ahead of third-quarter results on Nov. 5.
Eleven days after a rider's death on the Goliath roller coaster at Six Flags Over Georgia, the company has said what it plans to do. Its shareholders had not waited for the answer.
In a letter to guests and passholders dated Oct. 23, Chief Executive John Reilly said Six Flags is "adding seat belts on Goliath and other coasters with a similar restraint." He said the company has "engaged independent engineers and ride inspection specialists to comprehensively review current safety procedures across our entire portfolio of rides and attractions, across all of our parks."
Goliath "remains closed pending necessary safety reviews and clearances," the letter said, and "eight additional rides at five other parks are temporarily closed out of an abundance of caution." The parks remain open through Halloween weekend, with more than 220 roller coasters operating.
The letter became public after the market closed on Friday. Monday will be the first session in which the stock can trade on it.
What the letter commits to
The physical fix appears narrow. Goliath is one of nine Bolliger & Mabillard hypercoasters in the Six Flags chain, according to local reporting. Six of them already have seat belts in addition to lap-bar restraints. Three, including Goliath, do not. The company has not said which coasters will receive belts or when.
The review is broad. It covers every ride at every park, and the letter does not say when it will finish or what it might cost.
The cause of the Oct. 12 incident has not been determined.
A drawdown that kept going
Six Flags shares closed at $11.92 on Oct. 12, before the incident. They fell 14.4% the next day, to $10.20, and declined in six of the next eight sessions. Friday's close of $6.77, down 6.5% on the day and next to a 52-week low of $6.75, left the stock 43.2% below its pre-incident level.
That decline has cost shareholders roughly $530 million of market value. Six Flags is now worth about $690 million.
Some of the weakness is shared with the sector. Shares of its closest listed theme-park peer, which trades under the ticker PRKS, fell 10.7% from Oct. 13 to Friday. Six Flags fell 33.6% over the same span. The two steepest drops came first, on Oct. 13 and Oct. 14, when the stock fell 14.4% and 12.4%. On Oct. 21 it fell another 10.1%, on a day when Guggenheim cut its price target to $17 from $28 while keeping a Buy rating and Mizuho cut its target to $5 from $10 with an Underperform rating, citing a lack of free cash flow and rising leverage. UBS had earlier cut its target to $18 from $27 and said the market was overstating the financial impact. The analysts' targets now straddle Friday's close by a wide margin.
Several law firms have announced investigations on behalf of shareholders. No complaint tied to them had been reported as of Sunday.
First step or open-ended exposure
The constructive reading is that the company has moved from closure to remediation with a concrete fix, that the change applies to a small number of coasters, and that October is the tail end of the operating season, which limits the revenue lost to closed rides this year.
The cautious reading is that the review's scope is open-ended, that no closed ride has a reopening date, and that the company has offered no estimate of costs, attendance effects or liability before it reports. With the equity worth less than $700 million, small changes in expected cash flow move the stock a long way.
What to watch
Monday's session, any reopening announcements, the findings of the independent review and Six Flags' third-quarter results before the market opens on Nov. 5, when management will be asked to quantify the impact.