Live Nation stock has fallen more than 7% this week, following news of eight deaths and hundreds of injuries at Travis Scott‘s Astroworld music festival in Houston Friday night. That amounts to a $2 billion drop in market value for the world’s leading concert promoter — the question for investors now is, will the share price stay down for long?
Historically, it’s unlikely. For Live Nation, such accidents are unfortunate but not an unthinkable outcome when it holds tens of thousands of events every year in venues of all sizes. In the past decade, Live Nation has had two other events with multiple deaths and in both cases, the company’s share price immediately fell after investors absorbed the news coverage, but the losses were fleeting and the company’s market value soon returned to normal.
On Aug. 17, 2011, a temporary stage toppled from its foundation by a wind gust and toppled onto concertgoers at the Indiana State Fair during a concert by country group Sugarland, killing seven people and injuring 58. It made national news and chilling video footage of the accident spread across the internet. Live Nation shares fell 8.4% the following day, although the decline was an acceleration of a months-long downward trend, not a clear reaction to the tragedy specifically.
At the Route 91 Harvest country music festival on Oct. 1, 2017, a gunman, shooting from the Mandalay Bay Hotel, killed 60 concertgoers and injured another 411 — the deadliest mass shooting in U.S. history. Live Nation’s share price fell 2.7% over the first two trading day after the incident but remained stable over the next month and by the end of October the share price recaptured its losses. MGM Resorts, the Mandalay Bay’s owner, took a modest 5.6% one-day hit after the shooting, but shares soon reclaimed most of the loss and finished the year down just 1.8%. (Before adjusting for a dividend, the share price rose 2.5%).
Live Nation stock’s extraordinary run leading up to Astroworld could also explain some of the sell-off following the tragedy. Travel and entertainment stocks surged as the frequency of hospitalizations and deaths dropped and municipalities eased mandates and opened venues.
The message to investors is simple and alluring: tours are back, the market has pent-up demand for concerts and Live Nation has a tour pipeline that extends into 2024. Some investors likely used Astroworld as an opportunity to sell after shares rose from $86.08 on Sept. 3 to an all-time high close of $127.75 on Nov. 5 — a 48% spike in just two months.
The market reacts to a wide range of events, from press reports that create uncertainty in investors’ minds to earnings reports that show either blue or dark skies ahead. Live Nation shares fell 8.5% on Aug. 4, 2011, following news that the company had sued two insurance companies for denying coverage for class action lawsuits that consumers were redirected from Ticketmaster to more expensive options at its secondary ticketing platform, TicketsNow. That is unlikely to be a problem here and a legal settlement – even in the tens of millions of dollars – is unlikely to lower a stock price over the long term, according to Brandon Ross, an analyst at Lightshed Partners. “Financially, these shows are insured,” he wrote in an email to Billboard.
Government intervention, on the other hand, can lead to regulation or legislation that changes how a company operates. But here, too, Live Nation’s losses have been temporary. In April 2018, when a New York Times article about Live Nation contained Ticketmaster competitors’ allegations of anticompetitive practices that violated its consent decree with the U.S. Department of Justice, the news caused Live Nation’s share price to fall 9% the following trading day. But fears of government intervention dissipated and the downtown lasted just 32 days. When news broke in December 2019 that DOJ’s antitrust division was scrutinizing Live Nation, the company’s share price took four days to recover from an immediate 7.3% decline.
There are, of course, accidents that have had far-reaching and lasting consequences on the corporations involved. Take the oil industry, where ecological disasters are known by name decades later. BP shares dropped significantly after an oil rig, Deepwater Horizon, exploded off the Texas coast in 2010 — the share price declined 13% in seven trading days and lost half its market value in fewer than two months. Investors’ worries were well-founded: The U.S. Department of Justice handed down a $20.8 billion civil penalty and the company and some employees were given criminal charges. BP’s share price never recovered.
The difference between Deepwater Horizon and another ecological disaster, the Exxon Valdez oil tanker spill in 1989, was that there was more “headline risk” in 2010 than in the pre-internet days of three major TV news networks, Raymond James energy analyst Pavel Molchanov wrote at the time. Live Nation certainly faces a headline risk after Astroworld. Footage from concertgoers has proliferated online and the media shows little sign of losing interest in the story.
For its part, Live Nation is focused on the aftermath, not the media’s depiction of it. “We continue to support and assist local authorities in their ongoing investigation so that both the fans who attended and their families can get the answers they want and deserve,” the company said in a statement. Because the festival started the day after Live Nation’s third-quarter earnings call, investors have not had a chance to directly pose questions to the company’s executives. They should get a chance next week, however: Liberty Media, which owns 33% of Live Nation’s equity, will hold its shareholder meeting in New York on Nov. 18.
Doug Arthur, an analyst at Huber Research Partners, expected the Route 91 Harvest festival shooting to have reputation, legal and other implications for Live Nation, but those issues didn’t materialize. Now, Arthur — who raised his price target from $70 to $85 following Live Nation’s earnings release on Nov. 4 — says Route 91 Harvest did not have a lasting impact on the company’s value and expects the same for Astroworld.
“It’s sort of been lost in the mist of time” — financially speaking, he says. “You could argue if that mega-disaster [in Las Vegas] didn’t create a financial ripple for Live Nation, how could this?”