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Thursday, October 10, 2013

Report: Weak Opening For Shares of SFX Entertainment

Robert Sillerman
SFX Entertainment, a young company created to capitalize on the electronic dance music craze, opened for trading on Nasdaq at $13 a share, and after dipping as low as $10.64 the stock closed at $11.89, down 8.5 percent for the day, according to NY Times Dealbook.

SFX raised $260 million in the sale, which valued its business at slightly more than $1 billion.

The stock’s performance is to some degree a referendum on the value and perceived longevity of electronic dance music.

SFX, founded a year ago by the media impresario Robert F. X. Sillerman, has been buying festivals, promoters and other businesses like the online store Beatport, hoping to consolidate the dance audience and attract corporate sponsors. These deals have already made SFX a competitor to established concert promoters like Live Nation Entertainment.

Mr. Sillerman, who in the 1990s transformed the concert industry by consolidating dozens of regional rock promoters — which he sold to Clear Channel Communications in 2000 for $4.4 billion — described electronic dance music, or E.D.M., as the “universal, borderless language” of the young generation around the world.


But this offering could also indicate a bubble-like mentality spreading in IPO's, as investors and bankers try to launch the next billion-dollar business on public stock markets.

According to TheStreet.com, if the company's primary business is putting on electronic dance festivals, investors would do well to question whether they are arriving late to the party.

SFX Entertainment is a deeply unprofitable business that faces large competitive and legal risks. Nevertheless, the company is selling shares in an unusual IPO at a price that gives the firm a valuation of over $1 billion.

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