Robert Sillerman's attempts to build an SFX-style clickbait empire could be reaching their end, as the Function(x) founder files for chapter-11 bankruptcy
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Robert Sillerman says his new company is still on track to become the "preeminent digital media publisher", despite its delisting from the Nasdaq amid mounting debt
By Jon Chapple on 22 Jun 2017
As threatened at the beginning of June, former SFX Entertainment CEO Robert Sillerman’s new online news business, Function(x), has been delisted from the Nasdaq stock exchange, with trading in its stock suspended from opening of business today.
The business has yet to file an up-to-date quarterly report (10-Q) – which under Nasdaq rules constitutes a “public information failure” – and said in a recent filing it anticipates defaulting on US$3 million promissory note, in a scenario reminiscent of the financial problems that plagued the final months of SFX, which collapsed under a mountain of debt last February.
In a new 8-K filing, Function(x) – which has been rapidly buying up much of the online ‘viral content’ (clickbait) market – says it will continue trading stocks ‘over the counter’, or off-exchange, without the supervision of the Nasdaq.
“The company came to the conclusion that the overhang of uncertainty, and the continuing expense related to these issues, were an unnecessary cost and distraction as we execute on our vision,” says Sillerman. “Nothing has changed in our stated goals to become the preeminent digital media publisher.
“Nothing has changed in our stated goals to become the preeminent digital media publisher”
“We intend to file our 10-Q in the near term, and follow all necessary steps to both be a responsible and productive public company and accelerate our growth trajectory.”
Simply Wall St, a website which provides market advice to investors, isn’t so confident: It suggests Function(x) has a “concerning amount of debt” and may be at risk of succumbing to its debt load. According to the site, Function(x)’s operating cashflow remains at around -100% of its debt, with a debt-to-equity ratio of 279.8%.
“Clearly, Function(x) has a concerning amount of debt on its balance sheet,” writes Simply Wall St’s Arjun Bhatia. “Additionally, the company fails to impress in terms of generating strong enough operating cashflows and earnings to cover annual interest expenses. Thus, for now, I don’t find it a financially sound company.”
Function(x)’s stocks have fallen in value by almost 50% in last 30 days, from a high of $0.70 on 26 May to $0.39 today.
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