Live Nation has attracted some big name investors. Tiger Management, Lone Pine Capital and Glenview Capital Management are three of the hedge funds that bought shares of Live Nation in the first quarter, Reuters pointed out on Friday. The $12-per-share bid from Liberty Media – which failed – may have been what attracted these investors.
The Malone bid seemed to create a $12 floor for the stock, said Miller Tabak analyst David Joyce.
"Investors saw the tender offer as a seal of approval of what this combined entity could mean because of the unique, irreplaceable nature of the assets and business model," said Joyce.
The analyst, who rates Live Nation a "buy," said the company is in a strong position to benefit from being a market leader.
"It's a very healthy concert season coming up and there's expectation for growth in attendee spending as we come out of recession," said Joyce.
Good concert seasons come and go depending on which heritage artist hits the road that year. The real gauge of Live Nation’s value is its earnings over the long term. The article also addressed the long-term outlook and the company’s need to unlock the potential in their vertical integration.
While Live Nation's results should get a jolt in the short run from merger cost savings, seizing the potential benefits of vertical integration will make or break the company in the long run, analysts said.
In particular, because it manages the artists, runs the live venues, promotes the concerts and sells the tickets, Live Nation could more easily introduce key initiatives like dynamic pricing and paperless tickets….
Paperless tickets could undermine the secondary ticketing business if individuals can no longer resell their paper tickets without going back through the Live Nation technology platform.
Combined, the two innovations could give Live Nation a huge say in the pricing of secondary tickets and significantly reduce the influence of ticket scalpers.
Not mentioned is the current political logjam in New York over whether or not Ticketmaster should be able to control the secondary market for tickets. Governor Paterson wants consumers to have the option of paperless tickets in order to create a more vibrant (read: less controlled by Ticketmaster) marketplace for resale. If – and it’s a big if – Ticketmaster is able to control the secondary marketplace through paperless ticketing, it would be a profit windfall. But the situation in New York is evidence that governments elsewhere may not be willing to grant the company that much power. Investors are betting on a political win that is far from likely at this point.
Another key point was buried at the end of the article. With ticketing, promotion and artist management divisions operating independently, Live Nation needs to prove it has effective leadership to capture the synergies that exist where those divisions’ overlap one another.
A Gabelli manager acknowledged this challenge: "The bear case is that these synergies are not realized. You really need all these moving parts to work together for this merger to work."