What Does Live Nation Stock Purchase Say About Saudis' Approach to Entertainment?

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Saudi Arabian Public Investment Fund (PIF)'s $500 million purchase of a 5.7% stake in Live Nation on the open market Monday (April 27) could indicate a more passive play for the entertainment business since the country has been largely shunned over the murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul last October.

The gruesome murder was allegedly ordered by Saudi prince Mohammed bin Salman, according to reports by U.S. and Turkish intelligence agencies -- charges that Salman denied. The gruesome murder led Endeavor chairman Ari Emanuel to cancel a $400 million investment into his talent agency and content company and caused many in Hollywood to sour on the prince who had billed himself as a reformer in the powerful Arab country.

The recession brought on by the COVID crisis could present a new opportunity for the Saudis to take a more passive, investment-driven stake in entertainment. On Monday, PIF manager H.E. Yasir Al-Rumayyan filed a Schedule 13G with the Securities and Exchange Commission, indicating the fund won't attempt to influence control over the company and is taking a passive stake in the company. Banks and funds must publicly disclose to regulators any transaction involving a stake higher than 5% in a publicly traded company, according to the SEC's website.

The purchase comes less than three weeks after Saudi Arabia ended its weeks long price war with Russia that had sent the price of oil spiraling downward more than 50%. The PIF has also held stakes in Telsa -- which it sold off right before the company's stock rose 56% in January -- and it has struggled with its investments in Uber and Softbank's tech-focused Vision fund.

With stocks in free fall and the global economy headed for what could be a lengthy and painful recession, Al-Rumayyan announced during an online investment forum on April 23 that the sovereign wealth fund would pivot towards investments in travel, energy and entertainment. Two weeks earlier, the PIF disclosed it had purchased an 8.2% stake in Carnival, the world's largest cruise company with a fleet of 100 ships indefinitely docked by the COVID-19 crisis, as well as a controlling stake in English Premier soccer team Newcastle United.

"There will be economies up and running, we will see a lot of potential," al-Rumayyan said during the conference, speaking on his expectations for the second half of the year.

The 12.5 million shares of Live Nation common stock were purchased by the Saudis on the open market for approximately $500 million -- the money doesn't go to Live Nation as an investment but is exchanged with shareholders selling their stakes. The purchase is seen as a long-term play by the Saudis, boosting the shares of the company 10% to close at $42.01 on Monday.

Live Nation's share price was hit hard by the coronavirus outbreak, dropping by nearly 50% in what was supposed to be a record year for the publicly traded promoter. But quarantine orders across much of the country have made it almost impossible to stage concerts this summer and with the a live music comeback looking increasingly unlikely for the fall. That's led to crash of the Live Nation share price, although the company has been buoyed in recent weeks by news that chief executive Michael Rapino purchased a $1 million worth of shares, as well as news of a cost-savings plan, a new $120 million revolving credit facility and a balance sheet with $900 million in cash and another $2 billion in deferred event-based revenue.

The PIF's investment makes it the third-largest shareholder in the company after Vanguard Group and Liberty Media, which holds a 33% stake in Live Nation and reattributed its holding in the company last week from one that held its interest in Formula One Group to its SiriusXM tracking stock.

"For Liberty SiriusXM, this combines a complementary set of businesses that are established leaders in the live and audio entertainment space," Greg Maffei, Liberty Media president and chief executive said of the reattribution move on an April 23 investor call.

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