SFX’s sale of $15 million in stock suggests underlying financial troubles
SFX Entertainment has had quite the month. On May 26, CEO Robert Sillerman announced the company’s decision to go private with an offer to buy the remaining shares of his company for $5.25 a piece. Today, the company announced its sale of $15 million in stocks while also demonstrating to investors that the company could be facing some financial trouble.
Wolverine Flagship Fund Trading Limited and Virtual Point Holdings, LLC has purchased a portion of SFX’s stock for a total of $10 million in cash, at $4.34 a share. Sillerman Investment Partners, an entity affiliated with Sillerman, picked up the remaining $5 million of the sale (also in cash) at $4.82 a share. In addition, both buyers assured their ability to profit off of this deal by purchasing the shares as a “put option,” meaning that Sillerman would still have to buy his stocks back at the original price of $5.25 when the time comes to do so.
This hasty sale combined with the fact that it was done with solid cash is alarming to investors; the fact that shares were sold at a cheaper rate and for cash suggests the company is lacking in liquidity. Meanwhile, the short-term nature of today’s investment also shows a hint of desperation on SFX’s end. This fear caused overall share prices to plummet 8.1 percent on Thursday, down to $4.43 per share.
What does this mean for SFX in the long run? That remains to be seen. Although signs are clear that the company seems to be in need of liquid value after observed profit losses in recent quarters, it doesn’t seem like SFX will be brought down that easily. After all, the company’s portfolio contains some of the world’s biggest festivals like Tomorrowland that continue to grow in size and demand. Perhaps once the privatization is in full effect, things will be able to turn around.
Via: Billboard Magazine
Photo Credit: SFX