Some of you may LOVE Wendy’s but it might come as a surprise to some of you that Wendy’s hasn’t been doing so well financially and therefore this is one of the many businesses for sale now. On Monday, Wendy’s slashed its earnings forecast down and is now considering a sale among other alternatives. In April, the company contemplated a sale as an option and this past Monday, that option has become an option that they are likely to take. Wendy’s is the Number 3 hamburger gain and it cut its earnings forecast down about 9-13% per share. Wendy’s even tried adjusting prices to align itself with McDonalds and Burger King meaning that in some areas a baked potato would now cost $1.19 instead of the original .99 cents. It also was nudged to spin off a coffee and doughnut chain but apparently that plan didn’t fall through. One of Wendy’s largest owners, Highfields Capital Management, which owns 8.5% of Wendy’s was pushing for a sale to the highest bidder. Highfields Capital is a private investment manager firm. Wendy’s currently owns about 22% of its 9,900 stores and the other 78% are franchisee owned. A private equity buyer could might as well get something out of purchasing the firm by re-capitalizing the debt, re-franchising some of the company-owned restaurants and by indulging in better marketing strategies. Well, it would be interesting to see how this turns out for Wendy’s. In the mean time, lets have a look at its stock chart.
As you can see above, I have the entire stock chart showing the dividends in blue and the stock splits in orange. The chart above represents a time scale from 1983 to 2007 (current). If you notice, the stock splits came early and so it doesn’t make this too much fun as a buyer. All the dividends after 1987 were around the 6 cent mark.
Hypothetical Scenario for Fun
For example, if you purchased Wendy’s stock in the Feb of 1990 at $4 per share and you purchased 1000 of them for a total cost to you of $4000. Over the years you let it hang around and decided to sell around July 2006. So lets break this down.
Purchased: 1000 shares at $4 each for a cost of $4000
Sold: 1000 shares at $60 each for a sale price of $60,000
Thats a profit of $56,000 and that may not seem like much considering you waited 16 years but think about this in the case that you owned 10,000 shares then you will see a big change. If there were stock splits then you would see your profits rise instantly and thats what I meant that its not “too much fun as a buyer”
Interesting Facts That You May Not Have Known
1) The Total Market Capitalization for Wendy’s is $3.38 Billion
2) Outback Steakhouse was taken private this month for $3.5 Billion
3) Applebee’s is exploring a sale and reports were made that IHOP may have bid.
Well, I hope you enjoyed this post. I finally got to talk about a little bit of finance on my blog and I hope you appreciate my insight! I wonder if you guys actually like Wendy’s when compared to McDonalds or BurgerKing.