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Public live cos add nearly $6bn since March crash

The main publicly listed live entertainment companies have added US$5.75 billion – or nearly $1bn a month – to their collective value since the worst of the Covid-19-induced stock-market crash in March, new analysis reveals.

Combining the market capitalisations of Live Nation, CTS Eventim, DEAG, Time for Fun and Eventbrite, as well as a relevant percentage of Vivendi’s business, shows the six companies were worth nearly $6bn more on 21 September than 20 March, in spite of the six-month-and-counting shutdown of nearly all live experiences.

As in previous IQ coverage of live music’s (pre-coronavirus) stock-market performance, Live Nation Entertainment – the world’s biggest live entertainment business – is the biggest mover, growing its market cap by nearly 60% in the period analysed.

Worth $7.29bn on 20 March, with a share price of $33.97, Live Nation (LYV)’s market cap stood at $11.55bn six months later, with most financial analysts confident the concert behemoth will bounce back strongly post-pandemic. As of 9 September, of the 12 firms covering Live Nation stock, seven have assigned it a ‘buy’ rating, one a ‘strong buy’ and one a ‘hold’, with none recommending a ‘sell’.

While the recovery of Live Nation – which has made an estimated $600m in savings this year, believed to include widespread redundancies globally – is impressive, five of the six businesses included have rebounded strongly over the last six months, with only DEAG shares having declined in price as of 21 September.

Berlin-based Deustche Entertainment AG (LOUD), which trades on Frankfurt’s Xetra exchange, had around $11 million (€9.4m) shaved off its market cap after the value of its stocks fell from €3.48 on 20 March to exactly €3 on 21 September. As of the latter date, DEAG’s market capitalisation was €58.9m ($68.9m), down around 14% on €68.3m ($79.9m) six months previous.

Live Nation is the biggest mover, growing its market cap by nearly 60% in the period analysed

Yet DEAG stock, too, is strongly rated by market watchers: analysts’ ratings similarly lean heavily towards a ‘buy’, with even the most pessimistic financial observers giving the company’s stock a price target of €3.50 in the short term (while noting that DEAG should “return to pre-corona levels” by 2022).

Of the other four businesses, another German company, public pan-European concert and ticketing giant CTS Eventim, was the stand-out performer, growing its market cap more than $1bn by adding nearly €10 to its share price.

Compared to 20 March, when its share price was €31.78 and market cap €3.05bn, CTS Eventim (EVD) shares traded at €41.14 six months later, giving the company a market capitalisation of €3.95bn at the time of writing.

Brazil’s Time for Fun/T4F Entertainment (SHOW3) – the largest promoter in South America – has seen its value increase 42%, from R$131m ($23.8m) to R$186.1m ($33.8m), while US-based self-service and club ticketing specialist Eventbrite (EB) is up 61%, growing its market cap from $649.2m to $1.06bn in the same period.

French media conglomerate Vivendi (VIV), meanwhile, has seen its market cap rise from an estimated €20.9bn in March to €26.38bn on 21 September. The company’s Vivendi Village unit – which incorporates its live (Olympia Production, U Live, festivals and venues in France and Africa) and ticketing (See Tickets, Starticket, Paylogic) businesses – accounts for some 0.34% of the business: €26m in revenue, of €7.58bn total, per its H1 2020 report.

Many outside observers agree live music’s recovery will be complete by 2022

While it should be noted the industry is far from back to its pre-Covid-19 value – Live Nation stocks were once worth nearly $75, while Eventim shares hit a high of €60 in January – the rally bodes well for a sector often described as the first to close and last to reopen, and which has been hit particularly hard by the impact of the virus.

Additionally, the live music industry welcomed two newly public businesses – MSG Entertainment, spun off from the Madison Square Garden Company, and Warner Music Live/Umbrella Artists owner Warner Music Group, which floated in April and June, respectively – in the same period, and which would likely have pushed the $5.75bn figure even higher were those companies trading in March.

With so-called second lockdowns looming in many territories, it remains unclear how global markets will perform in the months ahead, as well as the effects, positive or otherwise, any volatility will have on live music stocks.

One thing, however, many outside observers seem to agree on is that live music’s recovery will be complete by 2022.

As IQ revealed earlier this month, financial consulting firm PricewaterhouseCoopers (PwC) is predicting a complete recovery by 2022, with the value of the live music market (public and private) set to reach $29.3bn – over $300m more than 2019’s $28.97bn – that year, while investment bank Goldman Sachs is similarly bullish, with its head of European media research, Lisa Yang, also heralding a return to normal in 2022.

Read PwC’s live music growth predictions here:

Live music down 64% this year – but will rebound in 2021


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Endeavor could raise $700m+ with 2019 IPO

WME Entertainment owner Endeavor could raise as much as US$712 million with its flotation later this year, according to the company’s latest filing with the US Security and Exchange Commission (SEC).

An amendment yesterday to Endeavor’s ‘form S-1’ –the document filed by American companies ahead of an initial public offering (IPO) – reveals the agency giant believes the value of its first 22m shares of class-A common stock could exceed $700m when they begin trading in late 2019.

Endeavor Group Holdings, Inc., the parent company of WME, sports agency IMG and martial-arts promoter Ultimate Fighting Championship (UFC), among other businesses, formally declared its intention to go public in May, with an initial valuation of $100 million ($100m is typically used in US as a placeholder before revealing the final figure).

Endeavor files $100m public offering

TheWrap reports that Endeavor reached its estimate by multiplying 22m registered shares by $32 apiece, which is the high end of what it expects to sell its stock for (the low end is $30). “Likely, however, Endeavor will only release 19-million-plus shares at the time of its initial public offering, an individual with knowledge of the plan tells TheWrap,” according to the site. “At $30 per share, that would raise just under $581 million. At $32, that figure jumps to more than $619 million.”

The IPO was originally planned for this summer, according to TheWrap, but was delayed while Endeavor acquires corporate hospitality company On Location Experiences.

 


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Public live companies grow $1bn+ per quarter since 2017

The major publicly traded live entertainment companies have increased their collective market value by more than US$8 billion in just two years, reflecting growing investor confidence in the industry.

Analysing the market capitalisations of Live Nation, CTS Eventim, Madison Square Garden Company, Deutsche Entertainment AG and Brazil’s T4F Entertainment (Time 4 Fun), as well as eBay’s StubHub and Vivendi’s live businesses, reveals the seven were worth around $8.4bn more at the end of June 2019 than in the same period two years previous.

The bulk of the heavy lifting was done by market leader Live Nation, whose share price stood at $66.25 at the end of the first half (H1) of the 2019 financial year. Journalist and stock-market analyst Manfred Tari notes that LN stock has in recent years vastly outperformed the Dow Jones Industrial Average, which tracks the value of 30 large public companies in the US.

“Since August 2016, the Dow Jones has recorded gains of more than 40%,” he observes. “Meanwhile, Live Nation shares have gained more than 40% since August 2018, boosted by positive analyst ratings and institutional investors raising their shareholdings.”

Nevertheless, five of the seven companies increased their market cap in that time – with only eBay, whose StubHub ticketing business accounts for just an eighth of its turnover, and T4F down in value.

“We hear a lot of talk about the ‘experience economy’, and these figures reflect that”

Several companies were not included in IQ’s analysis: Liberty Media (FWONK) owns a third of Live Nation, but its stake in LN represents its sole live activities, while Eventbrite (EB) only floated at the tail end of 2018. Other smaller listed businesses include British virtual-reality company MelodyVR (EVRH), US live-streaming firm LiveXLive (LIVX) and Singapore-based promoter Unusual (UNU).

Interestingly, over $7bn (~85%) of the two-year growth was added in the first seven months of 2019 alone, with live businesses’ performance on the markets generally accelerating this year, despite economic uncertainty around issues like Brexit, the US-China trade war and looming recession in Germany.

“We hear a lot of talk about the ‘experience economy’, and these figures reflect that,” comments industry economist Chris Carey. “As the cultural shift towards experiences and moments, especially those with social capital, continues, live entertainment is well placed to capitalise.”

In the streaming sector, Carey also highlights the “smooth” initial public offering (IPO) by market leader Spotify, which undertook an unconventional ‘direct listing’ of its shares on the NYSE in early 2018. “It’s important not to overlook the success of the Spotify IPO,” he says.

“While it didn’t set the world alight, the smooth listing on the NY Stock Exchange bolstered the market’s confidence in music streaming, which in turn has driven share price growth for Vivendi.”

In more detail, here’s how each of the core seven stack up:

 


Live Nation Entertainment (LYV)

H1 2019 share price (market cap): $66.25 ($13.88bn)
H1 2017 share price (market cap): $34.80 ($7.16bn)
Two-year change: +90.37%

The value of Live Nation’s shares has grown at an astronomical rate over the past four half-year cycles, jumping from under $50 to over $70 in 2019 alone.

The live entertainment giant, which includes concerts, sponsorship and ticketing (Ticketmaster) divisions, posted its eighth consecutive record annual results in 2018, with revenue topping $1.7bn – and is on course to deliver more of the same, including a double-digit increase in operating income, according to CEO Michael Rapino.

Live Nation’s shares outperformed the S&P 500 index throughout the H1 2017–H1 2019 period, and Wall Street sentiment remains positive: according to the Motley Fool, a clear majority of analysts give LYV a ‘buy’ rating (indicating an undervalued stock).

“LN shares have gained more than 40% since August 2018, bolstered by positive analyst ratings and institutional investors”

CTS Eventim (EVD)

H1 2019 share price (market cap): €40.92 (3.93bn)
H1 2017 share price (market cap): 39.24 (3.77bn)
Two-year change: +4.28%

CTS Eventim, the German ticketing and promotion powerhouse, saw its Börse Frankfurt-listed shares reach their highest price to date (€46.88) late last month, on the back of plans to acquire a significant stake in Fnac’s France Billet. Its market cap also climbed to a record €4.5bn.

At the time of IQ’s end-of-June snapshot, shares were trading at just shy of €41 – up from around €33 in January 2019 following a record-breaking 2018 and strong start to 2019.

Analysts are largely bullish on Eventim’s future growth potential, with MarketBeat listing five buys, two ‘holds’ and one ‘sell’, indicating a buy consensus, as of 14 August.

Eventim’s shares reached a record price in July, and analysts are bullish on its growth potential

Madison Square Garden Company (MSG)

H1 2019 share price (market cap): $279.94 ($6.65bn)
H1 2017 share price (market cap): $200.50 ($4.72bn)
Two-year change: +39.62%

New York-based Madison Square Garden Company, best known for its portfolio of US arenas and sports teams, made headlines in early 2018 when it revealed plans for its first international venue, in London, based on the spectacular MSG Sphere concept. The company has also diversified into esports, and has been identified as a key gaming-related stock.

Speaking during the company’s Q3 2019 earnings call, MSG CEO Jim Dolan hailed the “important progress” made with the MSG Sphere project in 2019, as well the impending spin-off of its sports business. “We remain confident that we are executing on a plan that positions us for long-term growth,” he told investors.

MSG stock has outperformed the S&P 500 consistently since March 2018, and holds a buy rating (seven buys and one hold) as of 13 August.

“We remain confident that we are executing on a plan that positions us for long-term growth”

DEAG (ERMK)

H1 2019 share price (market cap): 4.27 (€78.57m)
H1 2017 share price (market cap): 2.48 (45.63m)
Two-year change: +72.18%

While still small compared to the likes of CTS Eventim, Berlin-based DEAG, which celebrated its 40th anniversary in 2018, has grown its market capitalisation by nearly 75% since 2017, boosted by a string of acquisitions in Germany and the UK (the latter through promoter Kilimanjaro Live) and success in concerts, family entertainment and ticketing.

According to the company’s Q1 2019 earnings report, analysts monitoring DEAG stock give its shares a target price of between €5 and €7, with four buy ratings and one ‘outperform’ (ie a moderate buy).

DEAG has grown its market capitalisation by nearly 75% since 2017

T4F (SHOW3)

H1 2019 share price (market cap): $1.31 ($88.2m)
H1 2017 share price (market cap): $1.52 ($106.14m)
Two-year change: -14.3%

On a constant-currency basis, Sao Paulo-based T4F Entretenimento has shrunk slightly in the past two years, reflecting economic uncertainty in many South American markets where it is active.

In its 2018 year-end financial statement, T4F CEO Fernando Alterio highlighted political turbulence and hyperinflation in Argentina and Brazil as negatively affecting demand for tickets, but noted that the company expects to return to “historical levels of activity” this year. Despite these challenges, T4F sold nearly two million tickets last year, for a net revenue of R$598 million ($148m).

Analysts, too, are confident: BTG Pactual, which gives Time 4 Fun stock a buy rating, in April set a price target of R$11 for its shares – more than double the R$5 it is today, and a price it hasn’t hit since early 2018.

T4F expects to return to “historical levels of activity” this year

Vivendi (VIV)

H1 2019 share price (market cap): $27.43 ($33.78bn)
H1 2017 share price (market cap): $23.06 ($28.38bn)
Two-year change: +18.95%

Vivendi’s live (Olympia Production, U Live, festivals and venues in France and Africa) and ticketing (See Tickets, Digitick) businesses accounting for just under 0.9% of its revenue – €64m ($70.9m), of €7.35bn ($8.14bn), per its H1 2019 report – or around $54m of the French conglomerate’s two-year market cap growth.

With reports the company is planning a sell-off of up to 50% of Universal Music Group (H1 2019 revenue: $3.3bn), including 10% to China’s Tencent, expect that percentage to increase in years to come.

“It will be interesting to see how the global live companies engage with emerging markets”

eBay (EBAY)

H1 2019 share price (market cap): $39.50 ($34.43bn)
H1 2017 share price (market cap): $35.31 ($38.22bn)
Two-year change: –11.87%

As per eBay’s 2018 annual report, StubHub’s net transaction revenues were $1.1bn, out of $8.485bn total, the secondary ticket marketplace accounting for around an eighth of eBay group turnover.

That puts StubHub’s share of the $3.79bn wiped off eBay’s market cap over the past two years at just shy of $500m, though eBay Inc.’s share price is actually up by about 40% this year, more than double the S&P 500 Index – albeit largely in response to rumours it plans to offload StubHub, a move advocated by many activist investors.

 


Looking to the future, adds Carey, market-watchers should also keep an eye on the growth potential of developing countries. “It will be interesting to see how the global live companies engage with emerging markets,” he concludes.

“I’d anticipate an increase in activity within those geographies, but also a growth in talent from those markets being exploited in the established markets, too.”

 


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eBay stock drops as StubHub growth slows

After announcing that some 300 jobs were to be cut from its staff in California and lowering its revenue forecast for the rest of the year due to sluggish growth, StubHub’s parent company eBay suffered its worst day on the stock market in nearly two years last Thursday (19 July).

The day saw the value of stock drop by ten percent. As the market closed on Wednesday, stock stood at $37.95 but just 24 hours later the value had plummeted to $34.11 after a day of ups and downs.

After missing Credit Suisse’s quarterly expectations, secondary ticketing service StubHub is thought to have played a key role in the misfortune. Despite reporting a four percent rise in revenue to US$246 million, this was the company’s slowest growth since second quarter 2017. Executives at eBay have put this down largely to a poor sports season in the US, meaning tickets simply weren’t being bought and sold.

“When reports of layoffs are followed by a stock decline, it’s a particularly worrisome development all around.”

“It was a historically bad MLB (baseball) start of the season … and it was a 4-game NBA (basketball) series, it was a 5-game Final Series, it was a 5-game hockey series. There were just a lot of things that broke the wrong way on the landscape,” commented eBay’s CEO Devin Wenig.

Wenig went on to say he did expect the landscape to improve for the rest of the year. This was echoed in a note for investors written by analysts at financial services firm Raymond James. “Marketplace initiatives… are ramping slower than expected and likely shifts potential acceleration to 2019,” reads the note. It goes on to say StubHub’s growth “is likely to remain challenging in the near term.”

The fact eBay’s downturn happened after it announced a cut to staff is thought to be particularly concerning. Kevin Kelleher noted in an article for Fortune that “News of layoffs frequently leads to an increase in share prices, as investors anticipate lower costs will improve profits.

“When reports of layoffs are followed by a stock decline, it’s a particularly worrisome development all around.”

 


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