In what may spell the end of the EDM bubble, at least as far the business side is concerned, news outlets are reporting EDM giant SFX Entertainment are looking to sell off properties at discount rates.
SFX, which owns Australian dance festival Stereosonic, have been facing serious issues for the past few months, including liquidity problems and tumbling share prices, which recently hit an all-time low.
Just think, you could buy Stereosonic at a discount rate and run it however you see fit. Hate having to see endless social posts of shirtless idiots flood your Facebook feed every year? You can impose a ban on shiftlessness, though it might be bad for business.
Share prices had been falling for the past couple of months, but dropped even further over the weekend after SFX experienced problems at their TomorrowWorld event in the US, when thousands of tickets had to be refunded.
As some fairly post-apocalyptic photos on social media showed, thousands of revellers were left stranded overnight in the mud, after organisers closed off the TomorrowWorld festival site due to wet conditions.
According to the New York Business Journal, via Billboard, SFX Entertainment could become a smaller company in the near future as high-ups are considering selling off some assets at “fire sale prices”, though it’s not certain if Stereosonic will be one of them.
SFX’s financial situation is dire. The company is currently facing mounting losses and a high burn rate, and the company have resorted to raising capital twice this year, securing $90 million in new financing just two weeks ago.
In addition to the injection of $60 million from investors and $30 million in a new revolving credit facility, in June, SFX sold $15 million in stock at favorable terms. All the while, CEO Robert Sillerman was attempting to take the company private.
The company’s market value has taken a significant hit as a result. Yahoo Finance has an enterprise value for SFX of $311.1 million, a figure that includes the market value of SFX’s $295 million of long-term debt.
To buy the company’s common stock would require only $44.4 million at the current share price of $0.455, though the hypothetical buyer would also assume all of the company’s debt, making it a rather undesirable purchase.
To put that in context, the Herald Sun reports that the concert and entertainment giant purchased Stereosonic in 2013 as part of a deal valued at $75 million – more than the entire empire is worth today.
The Stereosonic purchase was part of an SFX spending spree, which also saw them pick up 100 percent of ID&T for $130 million, 100 percent of Totem OneLove for $69.1 million, as well as $35 million for 70 percent of Made Event and $12 million for 60 percent of i-Motion.
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According to Billboard, those four promoters alone cost the company $246 million. With the way things are going for what is widely regarded as the biggest name in EDM, SFX may have a difficult time selling these properties for cost.
As FACT writes, assets being considered for sale include online music store Beatport, ticketing agent Flavorus, and several international festival producers, which FACT sources say were overpaid for and the value of which “has bottomed out”.
According to the New York Business Journal, Totem OneLove Group Pty Ltd, the Australian electronic music festival producer who put on Stereosonic, could be one of the international promoters that’s up for grabs, though no statement from Totem has been released.
