An electronic dance music promoter’s IPO had a harsh comedown

October 9, 2013
October 9, 2013

Electronic dance music may be associated with feelings of euphoria, but there was no first-day high for SFX Entertainment, a company exposed to the booming genre.

Shares of SFX Entertainment slumped 8.5% after their first day of trading on the Nasdaq market today. The company says it is the “the largest producer of live events and entertainment content focused exclusively on the electronic music culture.” It mainly operates festivals, including Tomorrowland in Belgium, which sold out all of its approximately 180,000 tickets this year almost instantaneously, according to SFX’s IPO filing.

Electronic dance music has been incredibly popular in European nightclubs for decades, but has more recently developed a large devoted following in the US. Globally, the industry is projected to be worth $4.5 billion this year, New York-based SFX’s IPO filing says, citing data from the International Music Summit Business Report.

SFX’s CEO and founder, Robert Sillerman, is a colorful character, who once owned majority rights to Elvis Presley’s Graceland estate, and the production company behind the American Idol television series.

SFX raised $260 million through the IPO, with the number of shares being sold increased and priced at the top of its indicated range, a sign of demand for the issue. It will use the proceeds in part to acquire “the highest-quality festivals, event operators and promoters worldwide, as well as other businesses that are important to the EMC community.”

The IPO filing acknowledges in detail that SFX is heavily exposed to the ongoing popularity of dance music. Should that subside, it could be in for a tough time.  But Wednesday’s fall is probably more about investors finding the price it went public just a bit too rich.

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