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For a news report of the letter described below by an Associate Research Analyst of its sender, East Coast Asset Management, see


N.H. Snyder Instablog (posted on Seeking Alpha), November 2, 2010 posting


Nov 3, 2010 11:43 AM | about stocks: DVD



Noah is an Associate Research Analyst at East Coast. He is a 2012 MBA candidate focused on Value Investing at Columbia Business School where he is Associate Vice President of the Investment Ideas Club within Columbia’s Investment Management Association (CIMA). Noah has enjoyed several years of fundamental equity analysis experience including over one year of raising and independently managing equity portfolios for high net worth individuals.

At Columbia, Noah has assembled an investment team of colleagues with diversified buy-side experience to help manage these high net worth portfolios. Previously, Noah spent two years at Arlon Opportunities Investors, a New York-based long/short hedge fund focused on food, consumer, retail, and other commodity exposed equities with a strong emphasis on cyclicals. Noah received his BA in Finance from the University of Illinois at Urbana-Champaign.


East Coast Asset Management (“East Coast”) delivered a letter to the Board of Directors at Dover Motorsports, Inc. (“Dover”, or “The Company”) focusing on the obvious. Dover remains the odd man out of the motorsports industry oligopoly.

As a stand-alone operator, Dover benefits from none of the economies of scale that its competitors enjoy by operating multiple venues nationwide. Furthermore, East Coast predicts that Dover’s independence has cost shareholders anywhere from $150 million to $325 million over the last three and a half years.

Due to a history of value destruction and Dover’s uncompetitive strategic positioning, shares of the Company now trade at a significant discount to its asset value of >$200mm and Company’s valuation would be higher if placed in the hands of its competitors.

Thus, East Coast recommends that the Company’s Board engage an investment bank and begin a process through which shareholders will receive full and fair value for the Company’s assets. East Coast reiterates that Dover’s independence only stands to destroy further value which could be redeemed in full through a transaction with its competitors. Furthermore, recent statements from competitors show that they remain interested and ready to acquire Dover’s assets.

East Coast continues, “The Board in its current composition lacks the ability to impartially represent shareholders’ best interests." The interconnected Board lacks autonomy or a fresh perspective and the Board should nominate new independent Board members.

To conclude, East Coast asserts that the time for the Board to prove that it can create value in any strategic manner has come and gone. East Coast hopes that the Board pursues what is rational; the implementation of a robust asset sale process and the inclusion of independent Board members as these initiatives are pursued. While, the Board has been instrumental in destroying approximately 78% of the Company’s shareholder equity, it’s not too late to restore
much of this value through a sale of the Company.

Some statistics for support:
*The Board turned down an offer to be acquired for $5.85 per share in May 2007, now DVD trades at ~$1.75.

*International Speedway Corporation (ISCA) and Speedway Motorsports Inc. (TRK) control more than 85% of Sprint Cup races.

*Between acquisitions and building new race tracks, the Company has spent
nearly $200 million without improving the Company’s competitive position.

*LTM Dover has earned an anemic 1.6% ROE vs. its competitors average of 8.8%.

*Operating costs as a percentage of revenue continue to rise and over the last twelve months consumed 97.5%, or nearly all of the Company’s revenues.

*In contrast to ISCA and TRK, where EBITDA margins have averaged 38.7% since 2007, DVD has earned an average EBITDA margin of 15.7%.

*In the year before being acquire for $340mm, New Hampshire generated only $954k of EBITDA. Nevertheless, TRK projected G&A reductions of $18.7 million. With these projections, New Hampshire’s EBITDA would have moved from flat to nearly ~$20 million per annum. Dover's asset is superior to New Hampshire.

Disclosure: Long shares of DVD
Themes: NASCAR Stocks: DVD

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