The close of the Nasdaq Stock Exchange in New York following IPO rollout for SFX Entertainment (Photo courtesy of Nasdaq).
Want a piece of the growing Electronic Dance Music scene? Now shares of the music industry’s hottest commodity can be yours — for only $11.44.
That was the closing price Tuesday for SFX Entertainment, Robert Sillerman’s EDM-focused entertainment company that began trading on the Nasdaq exchange on Oct. 9. The IPO was introduced by Sillerman and Dutch DJ Afrojack, who appeared at Nasdaq’s New York headquarters, ringing the closing bell to mark the end of trading following SFX Entertainment’s first day on the exchange. With a trading symbol of SFXE, the company debuted at $13 per share and dipped nine percent at the close.
The IPO raised about $260 million for the two-year-old company created by Live Nation founder Sillerman. In the late 1990s, Sillerman spent $1.2 billion to purchase a number of promotion companies across North America — big name outfits like Bill Graham Presents, Feyline Entertainment and Pace Concerts. The company was eventually flipped and sold to Clear Channel Entertainment for $4.4 billion, which was eventually spun off into its current form, Live Nation. With a market cap of $3.7 billion, Live Nation is the largest promoter in the world.
Sillerman has made no secret of his plans to again create a global powerhouse with the new EDM-backed venture which owns events like TomorrowWorld in Atlanta and ElectricZoo in New York.
According to filings with the SEC, Sillerman maintains a 47-percent stake in the company and will use proceeds from the IPO to complete its purchases of ID&T Business, German electronic music event producer I-Motion GmbH Events & Communication, Australian festival producer Totem Onelove Group, and a 70 percent stake in Made Event LLC, which produces Electronic Zoo.
Sales at SFX jumped to $37.6 million from January to June, compared to $378,000 from the same period last year, according to the company's filing. The 10,000-percent spike was mostly from events that SFX produced, promoted or managed. At the $13-per-share IPO price, SFX has a market value of about $1.05 billion.
Besides festival promoters, SFX also owns online music hub Beatport, the world's largest DJ and electronic music community where artists can share and sell their music.
“If you look at what Sillerman is doing this time, he’s creating a number of divergent pathways to bring in revenue,” said Versales. “By creating revenue streams for both recorded music, live events and online communities, Sillerman is consolidating a national audience for corporate sponsors and media deals.”
It’s a similar strategy to Live Nation, Versales points out, which has seen its advertising and sponsorship divisions post the strongest gains in the company.
“The big question is going to be whether or not there are enough sponsorship dollars in the market for both companies to coexist or whether the appetite for spending in the live music space will cool in the coming months,” said Rich Tuillo, an entertainment industry analyst at Albert Fried & Company.
He pointed out that Live Nation recently purchased a large stake in Insomniac Events, producers of the Electric Daisy Carnival, one of the largest electronic music events in North America. Tuillo said an acquisitions race to buy up other EDM-centric businesses could kick off in 2014.
“I think the only way either company grows in the space is through acquisition, although Live Nation certainly has the capability to grow its share in EDM through the creation of new events," he said. "It’s really a matter of whether they find value in building new events from the ground up, or buying out established promoters.”
Interviewed for this article: Chip Versales, (212) 843-2313; Rich Tuillo, (917)641-5539