Vivid Seats Is Going Public, Testing Investor Confidence in Concerts' Comeback

rrvachov/Getty Images

With the U.S. concert season returning to pent-up demand for live events, Vivid Seats, one of the leading secondary ticket marketplaces, has entered into a definitive merger agreement with Horizon Acquisition Corporation, a special purpose acquisition company (SPAC) controlled by Todd Boehly and his Eldridge Industries investment firm.

Horizon raised $544 million in an August 2020 initial public offering on the strength of Boehly’s name and experience in media and entertainment companies. Boehly is chairman of MRC, which has an investment in Penske Media, Billboard’s parent company, and counts Los Angeles Dodgers, Draft Kings, The Beverly Hilton and Flexjet among his investments. He will join the Vivid Seats board of directors once the deal closes; Vivid Seats will retain its management team, including CEO Stan Chia and CFO Lawrence Fey.

Vivid Seats will receive roughly $769 million in the deal and be valued at approximately $2.06 billion. Eldrige, which provided $155 million of initial funding, will also invest in any common stock redeemed by Horizon shareholders, a right typically granted to SPAC investors who do not favor an acquisition. In addition, institutional investors will commit to a private placement of $225 million in common shares.

Vivid Seats will use the acquisition proceeds to pay down debt by $677 million, leaving $108 million of debt (net of cash) on its books, according to a Horizon investor presentation. The company said in a press release it will invest in “growth and improvement customer experiences.”

While some SPAC acquisitions involve developing technologies such as batteries or nascent industries like legal marijuana, Vivid Seats has healthy margins, a history of profitability, and the likelihood it will capitalize on an economic rebound and reboot of the concerts business. But Horizon entered the picture while the pandemic effectively put the live events business on hold and dropped Vivid Seats gross order value -- the value of all tickets sold, not just the fees Vivid Seats earned -- by 94% in $2.28 billion to $347 million in 2020 compared to 2019. In turn, net revenue fell by 75.6% from $471 million to $115 million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) dropped from $128 million to $5 million. Vivid Seats weathered the storm by making necessary cutbacks, reducing general and administrative costs by 50% from June through December and maintaining a positive EBITDA. The company’s value took a hit, however, and Vivid Seats took a $578.5 impairment expense in 2020.

A SPAC is an empty company, often called a blank check company, that raises money through an IPO on a public stock exchange with the express purpose of acquiring a private company. Companies increasingly favor the SPAC process because it avoids the public scrutiny and expenses related to a traditional IPO. SPACs reached a fever pitch earlier this month when Singapore app Grab announced it will list on the Nasdaq stock exchange through a SPAC at a $40 billion valuation. Everyone from A-list investors such as Pershing Square, which raised $4 billion in July 2020, to celebrity athletes such as former baseball player Alex Rodriguez have been involved with SPACs in the last year.

Out of 944 SPACs tracked by SPAC Analytics, a database of SPAC activity and IPOs, 427 SPACs that have raised a total of $138.7 billion are seeking acquisition; 254 SPAC IPOs that raised $63.6 billion are waiting to be completed; 130 acquisitions have been announced from SPACs with $31.7 billion in funding; and 90 SPACs liquidated -- they did not close a deal within the time limit, usually 24 months -- and returned investors’ money.

Vivid Seats expects that ticket sales will quickly return to normal by the end of 2021. According to company estimates, 15 to 20 artists plan to tour in 2021 that will sell over 500,000 tickets to Live Nation events in 2021, and about 45 of these artists will hit the road in 2022. (From 2017 to 2019, on average, there were 25 of these top-tier artist tours, according to the presentation.) With vaccinations on the rise in the U.S., tours are being booked again and thus far ticket on-sales have impressed: Bad Bunny set a blistering pace by selling 480,000 tickets to his El Último Tour del Mundo 2022 in less than one week in early April -- the fastest-selling tour since 2018.

Music has received little interest from SPACs that tend to focus on high-growth technology companies. To date, only Music Acquisition Corporation, a SPAC co-founded by former Geffen Records president Neil Jacobson that raised $230 million in February, is specifically focused on acquiring a music company.

Another potential music investor is Liberty Media Acquisition Corporation, the SPAC founded by Liberty Media, the majority owner of SiriusXM Radio and minority investor in Live Nation. LAMC, which raised $575 million in a January 2021 IPO on the Nasdaq exchange, is likely to acquire a company in the media, entertainment, communications, telecommunications or technology sector -- Liberty head John Malone’s sweet spot -- although it has not yet had “any substantive discussions” with potential targets, according to the LMAC website.