Stock in Penske Motorsports Gets Off to a Fast Start
When Roger Penske sees a green flag, he puts the pedal to the metal.
So it was Wednesday when the noted auto racing team owner and industrial magnate sped off the line on Wall Street with an initial public offering for Penske Motorsports Inc., a company now constructing an Indianapolis-style racetrack near Los Angeles.
The offering of 3.25 million shares, which was oversubscribed, raised about $78 million. Most of it will be used to complete construction of the California Speedway, a two-mile tri-oval track in Fontana on a 460-acre site of a former Kaiser steel mill.
The stock was offered at $24 a share and rapidly soared to as high as $32. It closed on the Nasdaq Stock Market at $31.75. Trading volume reached 3.875 million shares.
“This is an indication of the growing popularity of racing,” said Tom Doherty, an analyst for Robotti & Co. in New York. “The general public and investment community want to be part of the action.”
Penske Motorsports owns the Michigan International Speedway in Brooklyn, Mich., and the Nazareth Speedway in Pennsylvania. It also makes and sells racing merchandise and distributes Goodyear tires in the South and Midwest.
The company says it earned $6.8 million on sales of $42.1 million in 1995, compared with $6.3 million on sales of $40.5 million for 1994. Its strategy is to expand and improve existing racing facilities and move into the huge Southern California market with a new track for stock car and Indy races.
“This is a market of 17 million people in need of an oval that will showcase our sport,” said Les Richter, executive vice president of the California Speedway.
The $80-million speedway is expected to open early next year. It has already has been approved to hold an Indy car event, sanctioned by the Championship Auto Racing Teams, and also expects National Assn. of Stock Car Auto Racing approval for a Winston Cup race.
The speedway will open with seating for 69,000, with plans to expand to 107,000. It will also have 71 terrace suites and 55 chalets for private entertaining. It will be modeled on the Michigan track, which has the record for the fastest 500-mile race ever.
Motor racing crowds are growing faster than those for any other sport. Attendance at NASCAR’s Winston Cup and CART’s Indy Car World Series is up 42% since 1991, said Mark Basham, analyst for Standard & Poor’s Equities Group. In addition, the demographics of race spectators is attractive to advertisers. The median annual family income for Indy car spectators is $51,570.
“This has become a big business,” Basham said. “They keep adding tracks, TV coverage and corporate sponsors.”
After the public offering, Penske still owns 59.9% of his motor sports company. It is part of a far-flung Penske automotive empire with annual revenues that exceed $5 billion and including auto dealerships, truck rental and leasing, and diesel engine manufacturing.
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