LiveXLive acquires EDM promoter React Presents
Festival streaming platform LiveXLive has acquired React Presents, a Chicago-based promoter of electronic dance music events, for US$2 million.
React Presents, which puts on events including Spring Awakening Festival, Summer Set Music Festival and Mamby on the Beach, as well as over 250 club and venue shows a year, was formerly part of the LiveStyle portfolio (previously SFX Entertainment). The promoter generated $15m in revenue last year.
“This is a transformative moment in the evolution of LiveXLive,” comments the company’s CEO and chairman Robert Ellin. We have quickly become a leading livestreaming and original music content platform with a large global audience and more than 820,000 paid subscribers.
“By acquiring this key asset in the EDM space, we expanded our audience reach with the addition of more than 250 programmes and events”
“By acquiring this key asset in the EDM space, we added $15 million in revenues, expanded our audience reach with the addition of more than 250 programmes and events, and continued to fill in our flywheel with event ownership and management.”
In addition to its livestreaming platform for festivals including Rock in Rio, EDC Las Vegas and Montreux Jazz Festival, LiveXLive produces its own original music content, and also owns ticketing company Wantickets, management firm LXL Influencers, digital radio business Slacker and has partnered with esports venue giant Allied Esports.
Photo: swimfinfan/Flickr (CC BY-SA 2.0) (cropped)
The decade in live: 2015
The start of a new year and, perhaps more significantly, a new decade is fast approaching – and while many may be thinking ahead to New Year’s Eve plans and well-meaning 2020 resolutions, IQ is casting its mind back to the most pivotal industry moments of the last ten years.
Following on from a strong year in 2014, the live music industry in 2015 continued to go from strength to strength, with fans once again showing willingness to spend money on concert tickets.
After the success of their first all-stadia tour, British boyband One Direction embarked on another mammoth concert tour, which came in at number two on the year-end charts, despite the departure of band member Zayn Malik two months in. The tour was the beginning of the end for the band, which went on indefinite hiatus the following year.
2015 was a busy year in the live business, notably seeing the birth of Tim Leiweke and Irving Azoff’s Oak View Group. It was also the year that the Robert Sillerman’s rebirthed SFX Entertainment began to run into some serious trouble…
2015 in numbers
The top 100 worldwide tours grossed more than US$4.7 billion in 2015, up 14% from the year before but falling short of 2013’s $5bn. Ticket sales were also up, increasing by 16% to 59.7m, again lower than the 2013 total of 63.3m. The average ticket price in 2015 was down $3.30 to $78.80.
Taylor Swift was the top touring artist of the year, grossing $250.4m with her The 1989 world tour. The singer generated nearly $200m in North America alone, smashing the previous record of $162m set by the Rolling Stones in 2005.
One Direction also had a successful year with the On the Road Again tour, coming in behind Swift with year-end gross at $210.2m and selling 2.4m tickets, the most of any artist that year. AC/DC made $180m in ticket sales on their biggest tour to date, with U2’s Innocence + Experience grossing $152.2m and Foo Fighters’ Sonic Highway tour totalling $127m.
2015 in brief
Live Nation takes control of Austin City Limits and Lollapalooza promoter C3 Presents, paying a reported $125m for a 51% stake.
Austrian concert organiser Arcadia agrees a new partnership with four German companies – Four Artists, Chimperator Live, KKT and FKP Scorpio – to found Arcadia Live, a new
Live Nation agrees a joint venture with Thailand-based entertainment firm BEC-Tero. The new company, Live Nation BEC-Tero, will promote concerts by Western, J-Pop and K-Pop artists in the region, a pursuit in which BEC-Tero’s concerts division is already a market leader locally.
The Agency Group acquires UK-based electronic music agency Futureboogie, whose roster includes the likes of Bonobo, Crazy P and Nightmares on Wax.
The state of Washington passes a bill to outlaw ticket bots in an attempt to clamp down on the computer software that often prevents humans from buying seats online for concerts and sporting events. The move brings the number of states that have banned bots to 13.
A group of artists including Chris Martin, Calvin Harris, Madonna, Rihanna, Beyoncé, Jay Z, Kanye West, Daft Punk, Alicia Keys, Jack White and Nicki Minaj launch a new streaming service called Tidal, which is described as the first artist-owned platform for music and video.
The O2 arena in London announces that it has sold its 15 millionth ticket. The building, which opened in June 2007, has consistently been the most popular live music venue in the world, with research conducted by Media Insight Consulting claiming that 30% of the UK population has attended The O2 complex at least once.
ILMC launches the International Festival Forum, which aims to help strengthen the relationship between event organisers and agents. The London-based event is set to feature partner agencies such as Coda, The Agency Group, Primary Talent and X-ray Touring who will showcase festival-ready acts to promoters from around the world.
Australian media company Nine Entertainment sells its live events companies Nine Live and Ticketek to Asian private equity firm Affinity Equity Partners for AUD$640m ($480m).
Sydney-based Soapbox Artists, which grew out of the Australian wing of Ministry of Sound, announces its merger with the Melbourne-based 360 Agency. The combined EDM agencies will be a significant player in the dance market, representing a large roster of DJ and producer talent.
Live Nation acquires a controlling stake in American festival Bonnaroo. Under the terms of the deal, current promoters Superfly and AC Entertainment will continue to programme and run the event.
AEG agrees an extended deal with America’s International Speedway Corporation (ISC), allowing the company’s AEG Live division to look at organising concerts at racetracks around the country. ISC owns 13 raceways, including such iconic arenas as Daytona and Watkins Glen.
The Foo Fighters cancel a number of shows after frontman Dave Grohl breaks his leg during a concert in Sweden. Despite a nasty fracture, however, Grohl makes headlines around the world by returning to complete the Gothenburg show, receiving medical attention on stage.
German promoter Deutsche Entertainment AG and its UK offshoots Kilimanjaro Live and Raymond Gubbay Ltd, have set-up a company to sell tickets for their British shows. MyTicket.co.uk will expand the MyTicket concept that has already been running in Germany for six months.
The Windish Agency and Paradigm Talent Agency agree a partnership deal to form one of the world’s biggest independent agency operations, bringing The Windish Agency together with Paradigm partner agencies AM Only and Coda Music Agency, as well as Paradigm itself.
Live Nation Entertainment forms Live Nation Concerts Germany with German concert promoter Marek Lieberberg to promote concerts and festivals in Germany, Austria and Switzerland.
William Morris agent Sol Parker jumps ship to Coda Agency, taking Take That, The Prodigy and Rita Ora with him.
United Talent Agency completes its acquisition of The Agency Group.
Live Nation acquires venue and festival operator MAMA & Company, returning a number of former Live Nation assets to its portfolio.
Australian promoter Andrew McManus is arrested at Melbourne Airport on charges of money laundering and the importation of 300 kilograms of cocaine. McManus is one of five people arrested in Australia and the United States as part of an FBI investigation.
Disgruntled investors hit SFX with a lawsuit claiming they were deceived with false and misleading statements over the company’s privatisation plans.
Ebay-owned secondary ticketing platform StubHub launches in Germany.
Pandora completes a $450m takeover of specialist ticketing agency Ticketfly.
Several preliminary bids are reportedly submitted for EDM promoter SFX in addition to that from CEO Robert Sillerman, who bid to buy back the company for $3.25 per share.
SFX promotes former IQ new boss Sebastian Solano to CEO of ID&T North America.
Ex-AEG chief Tim Leiweke forms live entertainment investment firm Oak View Group with Irving Azoff.
Ex-Done Events chief Thomas Ovesen is named CEO of new Dubai-based live music company 117 Live.
Live Nation UK vice-president Steve Homer and senior vice-president Toby Leighton-Pope leave the company.
Who we lost
Mike Porcaro, bassist for Toto; blues legend B.B. King; John Gammon, Pollstar’s UK/Europe correspondent; veteran promoter and ILMC member, Paul King; Stage Entertainment’s project manager Sjoerd Unger; Live Nation venue chief David Vickers; U2 tour manager Dennis Sheehan.
The decade in live: 2013
The start of a new year and, perhaps more significantly, a new decade is fast approaching – and while many may be thinking ahead to New Year’s Eve plans and well-meaning 2020 resolutions, IQ is casting its mind back to the most pivotal industry moments of the last ten years.
Following on from a few tough years, 2013 was the year the live industry began to sparkle again, thanks to the improvement of several key economies and more favourable weather conditions.
The main issue for the 2013 business, in fact, appeared to be the abundance of tours, which somewhat outnumbered the amount of resources available to handle them.
2013 was also the year when a new generation began to shine, with the likes of Miley Cyrus, Justin Bieber and One Direction performing well on year-end charts, indicating that the future of live was certainly looking bright.
2013 in numbers
In 2013, the top 20 worldwide tours raked in a combined US$2.4 billion, up 24% on the $2bn generated the year before, according to Pollstar.
Bon Jovi once again made the top spot, surpassing their winning 2010 total by almost $60 million and achieving the highest year-end tour total of the year, grossing $259.5m from 2.7m tickets with the Because We Can tour.
Beyoncé’s The Mrs Carter Show came in second with a total gross of $188.6m, followed by Pink’s The Truth About Love with $170.6m. Justin Bieber came hot on the Pink’s heels at fourth, grossing $169m with his second concert tour Believe. Bruce Springsteen and the E Street Band earned $145.4m, adding to the $210.2m grossed in 2012.
Newcomers also made their mark in 2013, with One Direction scraping into the top ten global tours for the first time with the Take Me Home tour ($114) and Bruno Mars making his first top twenty appearance with Moonshine Jungle tour.
2013 in brief
Seatwave founder and chief exec Joe Cohen exits the UK-based company, claiming that the secondary ticketing business is in great shape.
Kylie Minogue and her manager of 25 years, Terry Blamey, split, as the artist announces her intention to concentrate on her acting career. Minogue is now represented by Jay-Z’s management company Roc Nation, who also look after Rihanna, MIA and The Ting Tings.
Universal sells EMI’s Parlophone label group to Warner Music for an estimated £480m ($764m). The deal effectively means that three record companies now dominate the global market – Universal, Sony and Warner.
SFX Entertainment receives an undisclosed financial boost from advertising giant WPP, which counts agencies such as JWT; Grey; and Young & Rubicam in its portfolio. The deal gives SFX a powerful ally as it looks to ramp up its EDM empire.
AEG’s deal to take over the management of Wembley Arena is referred to the Competition Commission in the UK after an investigation by the Office of Fair Trading, which is concerned that AEG has too big an influence over live entertainment in the capital.
Princess Diana’s brother, Earl Spencer, becomes arguably the most renowned ticket tout in the world, when he resells tickets for his debenture box at the Royal Albert Hall.
New York-based agency Paradigm launches a record label, Big Picnic Records, which boss Marty Diamond intends to use to “support the development of new artists.”
Ticketmaster files a lawsuit against a New York man who they allege uses bots to buy as many as 200,000 tickets a day, before the general public can.
Pink smashes her record of 17 shows at Melbourne’s Rod Laver Arena by booking an 18th date on her The Truth About Love tour. The Australian leg includes 46 shows and is expected to sell more than 500,000 tickets.
The promoter and stage supplier are charged in relation to a fatal stage collapse, which claimed the life of Radiohead drum tech Scott Johnson in Toronto’s Downsview Park last year.
Live Nation and Insomniac Events confirm rumours of a creative partnership, although the latter’s chief, Pasquale Rotella states Insomniac will remain independent.
Vince Power sells a major shareholding in Benicàssim Festival to SJM Concerts and Denis Desmond in a deal designed to assure the future of the popular Spanish event. Power will remain MD of the event which this year featured Arctic Monkeys, Queens of the Stone Age, Beady Eye, and The Killers.
Vivendi rejects an $8.5bn offer for Universal Music Group from Japanese telecoms giant SoftBank. It’s thought the increasing importance of music services in the mobile market prompted the unsolicited offer.
Lady Gaga and Madonna face prosecution in Russia for allegedly performing without proper visas. Both artists are accused of breaking Russia’s new gay propaganda laws, which make it illegal to promote homosexuality to minors.
Agency IMG Worldwide is put up for sale by private equity firm, Forstmann Little & Co, with analysts expecting a price tag of about $2bn.
Michael Gudinski’s Frontier Touring agrees a strategic partnership with dance promoter Future Music Festival to present the touring event, which visits five Australian cities and Malaysia next March.
Irving Azoff partners with The Madison Square Garden Company to create Azoff MSG Entertainment. In return for a $125m investment, MSG will own a 50% stake in a company, which will include artist management, TV production, live event branding and digital marketing divisions.
Benicàssim Festival © Jiquesan/Wikimedia Commons (CC BY-SA 4.0)
The jury in the $1.5bn case brought by Michael Jackson’s family against AEG finds that although AEG did employ Dr Conrad Murray, the company was not liable for his negligence.
Austin City Limits organisers are forced to cancel the final day of the US music festival when heavy rain and thunderstorms cause flooding.
Scooter Braun, manager of Justin Bieber, is pulling together a management conglomerate thanks to backing from Waddell & Reed Financial. The New York Times says Braun is in talks with several potential partners including Drake and his management team, Shania Twain and Troy Carter (ex Lady Gaga manager).
Live Nation confirms it is negotiating terms to acquire the management companies of U2 and Madonna. The deal to buy Paul McGuinness’s Principle Management and Guy Oseary’s Maverick could cost about $30m with Oseary taking over management of both operations.
Talent agency William Morris Endeavour acquires IMG Worldwide in a $2.3bn deal backed by private equity group Silver Lake.
SFX Entertainment pays $16.2m for a 75% stake in Dutch- based ticketing operation Paylogic, which counts 2,000 clients across its offices in Groningen, Amsterdam, Berlin and Antwerp.
Who we lost
Notable industry deaths in 2013 include Claude Nobs, Montreux Jazz Festival founder and GM, 76; Modern World founder Henning Tögel, 58; Cecil Womack, The Valentinos and Womack & Womack singer, aged 65; Live Nation Denmark CEO Flemming Schmidt, 63; German promoter Fritz Rau, 83; Edwin Shirley, founder of Edwin Shirley Trucking and Edwin Shirley Staging, 65; Danish live music impresario Arne Worsøe, 72; Velvet Underground singer and guitarist and solo artist Lou Reed, 71.
SFX Entertainment founder Robert Sillerman dies, 71
Robert FX Sillerman, the founder of SFX Entertainment, died of respiratory illness on Sunday (24 November), at the age of 71, Billboard confirmed.
Sillerman first founded concert promoter SFX Entertainment in the 1990s, paving the way for the modern-day consolidation of the business by acquiring promotion companies including Delsener/Slater Enterprises, Sunshine Promotions, Bill Graham Presents, Cellar Door Concerts and Avalon Attractions.
The original iteration of SFX was sold to Clear Channel in 2000 for US$4.4 billion, and later spun off to become what is now known as Live Nation.
In 2012, Sillerman refounded the company as an electronic dance music (EDM) festival promoter, rolling up promoters including React Presents in the US and ID&T, Made Events and Alda Events in Europe, as well as Florida-based venue operator MMG Nightlife in the US.
Following SFX’s demise, Sillerman was embroiled in a number of lawsuits. In July, he paid $179,000 to the US Securities and Exchange Commission, in a fraud case relating to his post-SFX online publishing business Function(x).
Randy Phillips steps down as LiveStyle CEO
Randy Phillips, the man who helped to salvage SFX Entertainment post LiveStyle rebrand, is stepping down as the company’s chief executive, as first reported by Billboard.
Phillips will stay on at LiveStyle as a consultant to investors, as the company prepares to sell off several of its assets.
The former LiveStyle boss will now focus on managing US boy band Why Don’t We, whom he states “are really starting to take off”.
Phillips took over the running of Robert Sillerman-founded SFX Entertainment in early 2017. The company had become insolvent two years after launching and Phillips was brought onboard to turn it around as the company emerged from bankruptcy. He led the dance music behemoth, rebranded as LiveStyle, for three years.
In just one year, Phillips turned losses of US$30 million into earnings of $20m.
Randy Phillips, the man who helped to salvage SFX Entertainment post LiveStyle rebrand, is stepping down as the company’s chief executive
“I was given my mission and I fulfilled my mission,” says Phillips. Under his leadership, LiveStyle sold assets including Paylogic to Vivendi and a minority stake in Rock in Rio to Live Nation and axed the US-leg of festival Mysteryland.
During Phillips’ tenure, LiveStyle made a number of high-profile hires, including Hard Events founder Gary Richards (president, North America), ex-Universal Music Group executive Chris Monaco (chief revenue officer) and NRG Productions founder Neil Ryan (senior vice president and head of North America production).
Prior to his work at LiveStyle, Phillips served as chief executive of AEG Live.
LiveStyle produces dance music festivals including Electric Zoo, Defqon.1 and Awakenings, operating through promoters and entertainment companies including Made Event and All My Friends in the United States, ID&T in the Netherlands and majority DEAG-owned I-Motion in Germany.
SFX founder Sillerman was recently charged with fraud in relation to his online publishing business, Function(x).
Australia’s new Festival X to debut this year
Festival X, the new Australian touring festival co-founded by Richie McNeill’s Hardware, ex-Stereosonic promoter Onelove and Live Nation Australasia, is set to launch in three cities this November.
The festival, announced last August but ultimately postponed until 2019, fills a slot left in the Australian festival calendar by dance music event Stereosonic, co-founded by McNeill and Onelove’s Frank Cotela, which at its peak could shift nearly 300,000 tickets across five shows.
In its first year, Festival X will visit open-air venues in Brisbane (RNA Showgrounds, 29 November), Sydney (Sydney Showgrounds, 30 November) and Melbourne (Melbourne Showgrounds, 1 December), “showcasing the best artists from across the world and within Australia to fans right across the Eastern seaboard”.
Headliners are Calvin Harris, Armin van Buuren and Lil Pump, with other performers including Steve Aoki, Blueface and Alison Wonderland.
Hardware Corp founder McNeill comments: “As they say, good things come to those who wait. We’re super excited to be working with Onelove again and the Live Nation team to put together an incredible mix of music in the electronic, pop and urban realms. There are so many amazing artists right now and some amazing creatives we have been working with.
“Something very special is happening here and we’re super-excited about it.”
Adds Cotela: “As we kick off the summer festival season in Australia once more, we hope to create an event that showcases entertainment on the scale we’re known internationally for, with massive artists, epic event production and a focus firmly on fun.
“We’re super excited to be working with Onelove again and the Live Nation team”
“Australia’s most successful electronic music promoters teaming up with the world’s largest touring company can only mean a great day for everyone. Festival X is looking ‘xtra-large’ and we can’t wait.”
Festival X represents McNeill and Cotela’s first collaboration with a major multinational since Totem Onelove Group, owned by the now-defunct SFX Entertainment, was placed into bankruptcy in May 2016. At the time, Onelove was owed US$10.7 million by SFX.
Stereosonic was effectively axed in 2015, after the 2016 edition of the festival was put on indefinite hiatus following SFX’s bankruptcy.
The new festival is organised by Onelove Music Group, a separate entity not connected with SFX.
Formed as a collaboration between industry leaders and teams behind some of Australia’s leading festivals,
Roger Field, CEO of Live Nation Australasia, says: “Festival X is set to wow Australian fans with the best local and international talent, while showcasing a new and exciting festival experience. X is the ultimate pre-summer party fans have been waiting for and deserve. Australia, get ready…”
Robert Sillerman fined $179,000 for investment fraud
Robert Sillerman has been charged with fraud by the US Securities and Exchange Commission (SEC), which has ordered the former SFX Entertainment CEO to pay a fine of US$179,000, as well as barring him permanently from serving as the director or officer of a business.
The SEC’s complaint, filed on 28 June, relates Sillerman’s post-SFX online publishing business, Function(x), which was quietly wound up last year after Sillerman was forced into bankruptcy by a creditor, Chicago promoter React Presents, which was owed $10 million in acquisition costs.
SFX filed for bankruptcy in February 2016 with debts of almost half a billion dollars, run up in a bid to rapidly consolidate the dance music sector (aping the roll-up of rock promoters in the early 2000s by the original SFX – now Live Nation).
Function(x) – an online news outfit specialising in clickable ‘viral’ content – ran into trouble in 2017, furloughed three quarters of its employees that September after finding itself unable to pay their wages. The lay-offs came after the company was delisted from the Nasdaq stock exchange after failing to meet the deadline for filing its quarterly report, and amid reports of unauthorised withdrawals to Sillerman from the company’s bank accounts.
Following the collapse of Function(x), the SEC (h/t Billboard) has charged Sillerman with “orchestrating an offering fraud” and “diverting offering proceeds to repay loans he had previously made to the company”.
The complaint elaborates: “Function(x), Inc., formerly an online publishing and entertainment business, incurred significant losses during the first quarter of 2017. To raise capital and fund its operations, Function(x) completed a public securities offering in February 2017, which brought in $4.8 million from investors. The complaint alleges that Sillerman fraudulently diverted $500,000 of the offering proceeds to repay certain loans he had made to Function(x).
“To induce investments in this offering, Sillerman falsely claimed that two celebrities had agreed to invest in the company”
“Then, in April and May 2017, Sillerman allegedly led efforts to raise additional money for Function(x) through a private securities offering. The SEC’s complaint alleges that to induce investments in this offering, Sillerman falsely claimed that two celebrities had agreed to invest in the company.
“The SEC further alleges that Sillerman created phony [sic] subscription documents, with forged signatures, purportedly from the two celebrities. Function(x) publicly announced that the offering had raised $10 million, which would be used for working capital and corporate expansion.
“In reality, however, the complaint alleges that Function(x) raised only half that amount and that Sillerman diverted all of the proceeds to his personal bank accounts, as further repayment of loans he had made to Function(x). Throughout his fraudulent scheme, Sillerman also allegedly ignored Function(x)’s internal accounting controls and failed to obtain approval to use offering proceeds to repay his loans.”
According to the SEC, Sillerman has agreed to pay the fine, as well as to a permanent “director-and-office bar”, pursuant to the resolution of his ongoing bankruptcy process.
The commission opened its investigation into Function(x) in November 2018, after the company was struck off the securities register for failing to file financial reports.
Function(x) future unclear as Sillerman heads for bankruptcy
Robert Sillerman’s troubled Function(x) web business is edging closer to insolvency following attempts by creditors to force the former SFX Entertainment chief into involuntary bankruptcy.
Chicago-based EDM promoter React Presents and its ticketing platform, ClubTix, in December 2017 won a judgment against Sillerman over an unpaid US$10m promissory note relating to the company’s 2014 acquisition by SFX. SFX filed for bankruptcy in February 2016 owing almost half a billion dollars.
Sillerman has since filed a petition to convert React’s request for ‘chapter 7’ (ie straight, or liquidation) bankruptcy into chapter 11 bankruptcy, wherein the bankrupt debtor is able to keep the company alive while they restructure.
Now, Sillerman’s current financial woes have caused his new company, Function(x) – an online news outfit specialising in clickable ‘viral’ content, which Sillerman has grown aggressively through rapid SFX-style consolidation – to warn the company could be facing a difficult future without monetary support from its CEO.
“There are no assurances the company will be able to secure an alternative source of funding”
In its latest current report filing with the US Securities and Exchange Commission (SEC), Function(x) explains to shareholders that, as executive chairman and CEO, Sillerman has historically provided “support to the company in form of cash and guarantees of company’s obligations”.
However, it warns, Sillerman may now “be unable to provide financial support to the company in the foreseeable future”, and that “there are no assurances the company will be able to secure an alternative source of funding.”
Function(x) furloughed three quarters of its employees last September after finding itself unable to pay their wages. In June, the company was delisted from the Nasdaq stock exchange after failing to meet the deadline for filing its quarterly report.
Function(x) furloughs 75% of its employees
Three quarters of staff at Function(x), the troubled online business founded by former SFX Entertainment CEO Robert Sillerman, have been effectively laid off, with the company telling investors it lacks the funds to pay them.
In its most recent 8-K filing with the US Securities and Exchange Commission (SEC), Function(x) reveals it has been operating with a skeleton staff since 15 September, when 22 of its 31 employees were put on indefinite furlough owing to a lack of “sufficient available funds to continue their employment at this time”.
A furlough – a term chiefly used in the US – is a temporary leave of absence imposed on employees by a company, especially one facing unfavourable economic circumstances.
“Any such decision by the company will depend, in part, on whether adequate funding can be obtained”
In Function(x)’s case, the business says it is “considering whether it will offer any or all of the furloughed employees re-employment” – a decision dependent, “in part, on whether adequate funding can be obtained, and there is no such assurance that may happen”.
Function(x), which specialises in ‘viral’ online content, has been in a downward spiral since early summer, culminating in its delisting from the Nasdaq stock exchange after failing to file an up-to-date current report. In June, auditors for the company resigned after discovering alleged “insufficiently authorised cash disbursements” to Sillerman from its bank accounts.
Sillerman auditor resigns over “illegal” withdrawals
Accountancy firm BDO USA, LLP, formerly auditor for Robert Sillerman’s troubled Function(x) web business, has resigned amid allegations of “insufficiently authorised cash disbursements” to Sillerman from company bank accounts.
In a 21 June letter to Function(x)’s CFO, Michelle Lanken, and general counsel, Tom McLean, BDO said it had, through a phone conversation on 12 May, been made “aware of information indicating that an ‘illegal act’ […] may have occurred”.
It continues: “BDO stated that information provided to it at the time of the phone conversation […] included insufficiently authorised cash disbursements from a [Function(x)] bank account, unexplained deposits into the same registrant bank account and possible repayment to the registrant’s chairman of the board, chief executive officer and controlling shareholder [Sillerman] in excess of the amount owed to him under his line of credit to the registrant.”
The letter says the “possible payments” include a US$500,000 cash withdrawal by Sillerman in March 2017, “done without proper approval from the board”, and, more seriously, a total of $6.1m “released from a [Function(x)] bank account into an account held by the CEO at the same financial institution”.
The findings mirror similar allegations levelled at Sillerman in the final months of SFX Entertainment
At BDO’s request, it and Function(x) hired a third-party law firm to investigate the missing money, as well as alleged irregularities relating to a recent series-G stock offering. It concluded that there were “likely illegal acts committed by the CEO and the registrant [Function(x)]”, including “false and misleading statements in connection with the series-G offering”.
The findings mirror similar allegations levelled at Sillerman in the final months of SFX Entertainment, when he was accused of making “misleading statements” designed to boost the ailing business’s attractiveness to investors.
He denies any “wilful” wrongdoing, saying he was “misinformed as to the amounts outstanding on loans the CEO had made to the company” and paid Function(x) back as soon as he realised the error.
Function(x), which specialises in ‘viral’ online content, was last week delisted from the Nasdaq stock exchange after failing to file an up-to-date current report.