SFX Entertainment is having a tough second week as a public company. Shares of the EDM-focused music promotion and media company fell as much as 11.7% to $8.95 on Thursday before rebounding slightly and closing down 7.8% at $9.50. A day earlier, as news that a U.S. debt default would be averted pushed equity markets higher, SFX fell as much as 12.7% to $10.16 and closed under $11 for the first time.
After a successful IPO, market enthusiasm in the company has slipped. The losses on Wednesday and Thursday eroded nearly $163 million of market value. SFX's current $797 million valuation is 24.1% below the $1.05 billion valuation of its IPO. In contrast, shares of Live Nation, the publicly traded company most comparable to SFX, are up 2.9% since SFX's IPO.
SFX shares have broken through three psychological barriers: the $13 IPO price, the $11 that marked the low end of the IPO pricing range, and the $10 threshold below which SFX shares are valued in the single digits. Albert Fried & Company analyst Rich Tullo spotted trouble when SFX was trading below the IPO price as soon as it hit the Nasdaq. "Given that the stock is trading below $13, it's going to be hard to get back to the IPO price," Tullo told Billboard.
SFX's IPO was a success. The IPO underwriters were able to sell 20 million shares at $13 for a gross of $260 million and a net, after underwriting discounts and commissions, of $242 million. Demand from the institutional investors that bought into the IPO drove up the price and shares offered. The company decided to increase the number of shares sold to 20 million from an initial estimate of 16.7 million shares. The $13 IPO price was the high mark of the $11 to $13 range set before the IPO.
A lack of information currently guides changes in the stock price. Analysts from firms involved in SFX's IPO are prohibited from issuing research on the stock until after the SEC-mandated quiet period ends. (Banks have been waiting 25 days after an IPO to issue research.) No other analysts are covering SFX yet. More information -- beyond what SFX revealed in its IPO filing -- and quarterly earnings statements will eventually provide the market with guidance.
As its share price wanders, SFX will continue building a business around what it calls "significant and growing scale" with its live events. “My job is to do the best possible job to bring this music and cultural phenomenon to as broad [an audience] as effectively as possible -- the stock price will take care of itself," chairman and CEO Robert Sillerman told Billboard last week.