Why Topgolf Callaway Rallied on Monday

Shares of Topgolf Callaway (NYSE: MODG) rocketed 11.3% higher on Monday, as of 1:16 p.m. ET.

The company, which owns the Callaway golf club and ball brand, as well as Topgolf driving range restaurants, rose on a disclosure that an insider purchased a significant amount of stock on the open market last week.

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With the stock having been cut in half over the past year and 83% off its 2021 all-time highs, investors might have seen the insider buy as a sign the stock is bottoming.

Adebayo Ogunlesi, Topgolf Callaway director, scoops up discounted shares

On Friday, it was disclosed that director Adebayo Ogunlesi purchased more Topgolf shares on the open market between June 4 and 5 of last week. All in all, Ogunlesi bought 383,701 shares last week, at an average price around $6.47 per share, good for about $2.5 million.

The Nigerian-born Ogunlesi has had a storied career as an investment banker, then chairman and managing partner of private equity firm Global Infrastructure Partners. BlackRock bought GIP last year, and Ogunlesi also became a BlackRock board member.

Ogunlesi may see the beaten-down shares as a bargain, given that the high inflation of the past couple of years, which dampened demand at Topgolf, may be ebbing. Additionally, Topgolf and Callaway are about to split the company, with management announcing it will spin off 80.1% of Topgolf in late 2025, effectively undoing the 2021 acquisition of Topgolf by Callaway. So, Ogunlesi may be bullish on the financial engineering and prospects for each company as stand-alone entities.

Image source: Getty Images.

Don't buy just because Ogunlesi did

Before diving in, investors may want to pause and look closer at the stock. Topgolf is down so much because recent results have been disappointing. So, does Ogunlesi see signs of a reversal in these trends?

It should be noted that Ogunlesi has been a Callaway board member since 2010. That means he was part of the decision to buy Topgolf in the first place -- a decision that is now being unwound. Moreover, Ogunlesi last bought shares on the open market in June 2023, and shares are down 60% since that purchase.

Therefore, investors should do their own due diligence on this turnaround situation, not just follow this insider into the stock.

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Billy Duberstein and/or his clients has no position in any of the stocks mentioned. The Motley Fool recommends Topgolf Callaway Brands. The Motley Fool has a disclosure policy.