Based in New York, NY, SFX Entertainment (SFXE) scheduled a $200 million IPO with a market capitalization of $966 million at a price range mid-point of $12 for Wednesday, October 9, 2013.
Seven IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.
S-1 filed September 25, 2013
Manager, Joint Managers: UBS; Jefferies; Deutsche
Co-Managers: Stifel; BTIG
SFXE believes it is the largest worldwide producer of live events and entertainment content focused exclusively on the electronic music culture ("EMC"), based on attendance and revenue.
SFXE is a consolidation by rollup (acquisitions) of leading music festivals. The target, growing market is the millennial generation.
because seasonal, using 2012 results
Buy SFXE on the IPO, because it has critical mass with high barriers to competition, in a growing market.
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:
SFXE started its business in July 2011 and was incorporated in Delaware in June 2012. Operations and assets consist almost entirely of businesses acquired during 2012 and 2013.
SFXE believes it is the largest producer of live events and entertainment content focused exclusively on the electronic music culture ("EMC"), based on attendance and revenue.
SFXE views EMC as a global generational movement driven by a rapidly developing community of avid followers among the millennial generation.
On a pro forma basis for completed acquisitions, SFXE attracted 1.3 million fans in 2012 (a 36.0% increase from 2011), and on a pro forma basis for completed and planned acquisitions, SFXE attracted 2.8 million fans in 2012 (a 22.2% increase from 2011).
SFXE believes the broad appeal of EMC beyond festival attendance is demonstrated by the deep engagement of fans, which is evidenced by the time they devote to EMC-related social media and digital activities.
For example, the 2012 Tomorrowland festival in Belgium had 7.9 million live views on YouTube and the official Tomorrowland long-form after movies have had over 157 million online views to date.
SFXE's leading EMC festivals
SFXE has presented Life in Color events and two Sensation festivals and has acquired the rights to the Tomorrowland, Mysteryland and Q-Dance festivals in North America. Through planned acquisitions, SFXE expects to acquire the rights to those festivals worldwide, as well as the rights to Stereosonic, Electric Zoo, Decibel, Nature One, MayDay and Ruhr-in-Love, among others.
Tomorrowland sold out all of its 180,000 tickets to the 2013 festival in Belgium in one second and saw significant demand from U.S.-based fans, each seeking to purchase multiple tickets. To meet the growing demand of the EMC community in the United States and other regions around the world, SFXE plans to introduce some of the most popular festivals and events to certain areas for the first time.
At its original location in Amsterdam, Sensation has consistently sold out since its inception in 2000, including all 37,000 tickets for 2013. The ID&T JV has held two Sensation festivals in North America in 2013, its inaugural festival in Toronto, which attracted over 24,000 attendees, and a second festival in Oakland.
SFXE has announced three additional Sensation events in North America for 2013, which will be held in Las Vegas, Miami and New York. The ID&T JV sold more than 120,000 tickets to the first North American Tomorrowland festival, TomorrowWorld, which SFXE held outside of Atlanta from September 27 through September 29, 2013.
The global market directly associated with electronic dance music is projected to be $4.5 billion in 2013, according to the International Music Summit Business Report. Electronic music has a history of over 20 years of mainstream popularity in Europe and has more recently evolved into a widely followed genre of music in the United States and other international markets.
Total attendance at what are currently the five largest U.S. EMC festivals grew 41% annually from 2007 to 2012. This compares to 2% annual revenue growth for the overall North American concert market during the same period, according to Pollstar, a concert industry trade publication.
In 2012, the National Academy of Recording Arts and Sciences added a Dance/Electronic category for the Grammy Awards, Billboard launched a Dance/Electronic chart, and in February 2013, a Dance/Electronic song reached #1 on the Billboard Hot 100 chart for the first time.
EMC festivals and events typically feature many different artists and DJs, as well as elaborate sets, lighting and special effects centered on different creative themes. These festivals and events have become highly experiential and social happenings that are enjoyed by thousands of fans. These experiences, further propelled via social media and shared by millions of fans globally, are at the heart of the generational movement that is EMC.
SXFE's market is characterized by a high degree of ownership fragmentation, and SFXE believes it is well positioned for consolidation.
Enhance the fan experience.
Planned acquisitions have already attracted multiple well known, corporate brand partners, such as Anheuser-Busch, Heineken, Labatt and Samsung, including for multi-event and repeat sponsorships. In addition, SFXE received a strategic investment from WPP, one of the largest global advertising agencies, in April 2013.
Bring festivals into new markets and expand current offerings.
Foster deeper engagement within the EMC community.
Acquire and integrate leading live event and online properties.
Most of the largest festivals and events to occur outdoors, primarily in the warmer months. For example, ID&T, Made and SFXE's ID&T JV stage most of their festivals in August and September, and Totem stages most of its festivals in November and December in Australia.
Revenues from these festivals to be higher during the third and fourth quarters, and lower in its first and second quarters.
Portions of the business are generally not subject to seasonal fluctuation or experience much lower seasonal fluctuation, such as the venues their MMG business manages, which receive higher revenues in the winter months because there are more travelers in Miami during the December holidays, as well as the Winter Music Conference, and the Life in Color business, which produces festivals and events primarily for college campuses during the school year.
5% stockholders pre-IPO
Robert F.X. Sillerman, 46.7%
Entertainment Events Funding LLC, 5%
One of Us Holding B.V., 7%
Use of proceeds
SFXE expects to net $179 million from its IPO. Proceeds are allocated as follows:
$56.3 million to close the acquisition of 100% of the ownership interests in the ID&T business, including the acquisition of the remaining interests in the ID&T JV;
$16.0 million to close the acquisition of 100% of the ownership interests in i-Motion;
$61.1 million to close the acquisition of substantially all of the assets of Totem;
$16.3 million to close the acquisition of 70% of the ownership interests in Made; and
Balance to fund working capital, capital expenditures and other general corporate purposes.
Disclaimer: This SFXE IPO report is based on a reading and analysis of SFXE's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.