SFX Entertainment could be a smaller company in near future — the EDM promoter is considering selling off some assets at fire sale prices, according to a report from the New York Business Journal.
An asset sale wouldn’t be surprising given SFX’s financial situation. With mounting losses and a high burn rate, the company has resorted to raising capital twice this year. Two weeks ago the company secured $90 million in new financing — $60 million from investors plus $30 million in a new revolving credit facility. In June, SFX sold $15 million in stock at favorable terms. This all took place against a backdrop of a failed effort by chairman and CEO Robert Sillerman to take the company private.
It could get worse. Transportation issues caused by rain during last weekend’s TomorrowWorld festival outside of Atlanta resulted in thousands of people stranded outside the event. SFX said it will offer refunds that are sure to hurt its third-quarter revenue and operating income.
All these problems are reflected in the company’s market value. Yahoo Finance has an enterprise value for SFX of $311.1 million, a figure that includes the market value of SFX’s $295 million of long-term debt (a hypothetical purchaser would have to assume it) and an estimate of current cash level. To buy the company’s common stock would require only $44.4 million at the current share price of $0.455.
SFX has spent hundreds of millions of dollars on EDM promoters: $130 million for 100 percent of ID&T, $69.1 million for 100 percent of Totem, $35 million for 70 percent of Made Event and $12 million for 60 percent of i-Motion, to name just a few. Those four promoters alone cost $246 million. The way things are going, SFX may have a difficult time selling them for cost.