CHANHASSEN, MN -- The stock of Life Time Fitness, which took a hit last week after a negative report from a stock market research company, received a boost this week after the purchase of the company's stock by Green Equity Investors, an affiliate of the $9 billion private equity firm Leonard Green and Partners.
A filing showed that from mid-October through November, Green Equity Investors had purchased $53.5 million worth of Life Time stock, or about $14.74 per share. Life Time’s stock, which recently set a 52-week low of $8.03, went up to around $11 per share Tuesday after news of the Green Equity Investor purchases became public.
Last week, Citron Research, a research shop that focuses on overvalued situations or scams in the stock market, published a negative report about Life Time, saying the Chanhassen, MN-based company has a business model that no company has ever proven successful. Citron cited Life Time’s monthly membership contracts as its biggest strength but also its biggest weakness.
The Citron report said that Life Time’s equity would eventually be wiped away as the company carried a debt load that it would no longer be able to service. Citron cited Life Time’s 40 percent attrition rate, high membership rates and a struggling economy as factors affecting the company.
“These huge debt-heavy and capex-heavy club operations are the antithesis of the agile, nimble and cash-flow positive companies that will survive a severe downturn in consumer discretionary spending,” Citron says. “Bally couldn’t do it, and Citron believes Life Time won’t be able to, either.”
Citron plans to publish a report comparing the financials of Bally Total Fitness before it went bankrupt last year with those of Life Time to show what the future holds for Life Time.
Leonard Green and Partners, Los Angeles, focuses on companies that are market leaders with strong management and have the ability to grow 50 percent over a five-year period, according to the company’s Web site. The company also recently bought up shares of Whole Foods.
In the filing, Leonard Green and Partners noted that informal and general discussions with Life Time executives had occurred and that more detailed talks about possible changes at Life Time might take place in the future.
Asked about the possible talks with Leonard Green and Partners, a Life Time Fitness spokesperson would only say that as a matter of course, the company does not comment on shareholder transactions.