While SFX’s struggles through the past year or so have been well documented, it is still fairly surprising to see a company of that size have to seriously consider bankruptcy as a viable option. While controversial CEO Robert Sillerman has strung investors along for a long takeover period lasting almost a full year, riddled with multiple failed bids, and huge injections of capital to keep SFX afloat, it seems that all that’s left would be a full-scale restructuring.
SFX Entertainment first went public raising $260 million in its IPO in September 2013 with investors believing that Sillerman would be able to create one singular EDM powerhouse. Sillerman used that capital to buy EDM festivals across the world including Tomorrowland, Mysterland, Life in Color, Electric Zoo, Sensation, and more. To fund such a huge expansion SFX also had to sell around $300 million in debt.
By the start of 2015, SFX looked in prime position to compete with Live Nation raking in over $350 million annually, but under the surface things weren’t so rosy. Impressive as the revenue may be, SFX was far from the profits it had promised investors, and investors started to lose confidence as expenses piled up and cash bled.
Sillerman decided he wanted full control of the company back mounting several bids to take the company private, the first in February with an improved offer in June. Unfortunately for Sillerman, SFX’s financial problems and Sillerman’s inability to raise capital resulted in a reneged deal by August. Sillerman returned with a capital injection in September and a renewed bid which was he was also forced to withdraw by November.
Yesterday, SFX reported to the SEC that it had hired FTI Consulting as a chief restructuring officer to manage their $312.6 million in debt, which more or less spelled out the company’s future; bankruptcy is now fully on the table – just over two years after raising $260 million in its IPO. Sillerman still owns roughly 40% of SFX’s outstanding stock as well as preferred shares, so much of what the company does here on out will still have Sillerman’s imprint all over it.