Shares of SFX rose 19.9 percent to $4.94 Tuesday but stopped 5.9 percent below Sillerman's bid. The spread between the closing price and the bid can be considered the value of the uncertainty the deal will be completed. The merger agreement contains a 45-day period during which SFX's special committee will solicit and possibly negotiate for alternate proposals. In addition, the merger agreement needs the approval of a majority of unaffiliated shareholders.
SFX, a major player on the rise and future of EDM, now has a portfolio that includes festivals such as Tomorrowland, TomorrowWorld and Electric Zoo as well as Beatport, a DJ-focused website, download store and streaming service. The company's initial public stock offering in October 2013 raised $260 million by selling 20 million shares at $13 per share.
SFX Chairman Robert Sillerman Offers Plan to Take Company Private
Tapping the public market allowed SFX material to build its EDM powerhouse. The IPO proceeds helped close out some of SFX's earlier acquisitions such as Totem, ID&T, Made and i-Motion. But SFX has been, at best, a work in progress. Performance hasn't matched pre-IPO expectations. Quarterly and annual earnings have contained deep losses. A business modeled after Live Nation -- promotion, ticketing and sponsorships -- lacks the certainty of Live Nation.
If approved, Sillerman could buy SFX for a fraction of what investors originally paid. Priced at $13, SFX shares rose to $13.99 but fell as far as $10.89 and ended the first day of trading at $11.19. A purchase price of $5.25 per share would value SFX at $490 million.