On March 12, the day Live Nation suspended its tours, and with the stock market slipping, Live Nation chief executive officer Michael Rapino bought $1 million in his company’s stock — a show of confidence when it was becoming clear the company faced a prolonged absence. Six days later, Live Nation shares reached their pandemic-era low of $21.70, a 70.1% free fall from the pre-pandemic closing price of $74.19. The economy was in a tailspin — the U.S. gross domestic product dropped 32.9% in the second quarter — and companies in the outdoor entertainment space, from movie theaters to theme parks, had lost their customers.
Ten months later, on Thursday (Dec. 17), Live Nation’s share price surpassed its pre-pandemic levels. At midday it hit $73.93, 20 cents above the lowest price on Feb. 21, the trading day before the coronavirus slide. Analysts are slightly less optimistic, though: the average of 13 analyst ratings of Live Nation is $66.10 with a high of $85.00 and a low of $56.00 (per the Wall Street Journal).
The share price’s rebound speaks to Live Nation’s efforts to sustain itself more than the health of the overall concert business. Live Nation is in the enviable position of receiving a lifeline through capital markets — it raised $1.2 billion through a debt sale and announced on Thursday it plans to sell an additional $500 million of notes. Even after two full quarters without concerts — revenues for the second and third quarters were down 97.7% and 95.1% respectively — Live Nation has $2.6 billion of cash and cash equivalents as of Sep. 30. After layoffs and cost-saving measures reduced monthly cash burn to $100 million, Live Nation’s financial maneuvering will get the company to the summer concert season.
A ripple effect has left adjacent companies in financial precarious positions eight months after tours were suspended. Agencies have struggled as their clients’ touring income disappeared, resulting in layoffs or furloughed staffers: CAA had “significant layoffs” in June; Endeavor laid off a third of its employees “to mitigate the impact” of the pandemic; UTA furloughed workers and later reinstated staff pay while laying off 50 staffers; Paradigm cut 180 staffers after the pandemic’s effect extended “longer than we had even imagined six months ago,” said chairman and founder Sam Gores. Billboard’s running list of venues that permanently closed in 2020 — they cannot follow large companies in raising money through debt sale or tap a deep line of credit — speaks volumes about the fragile state of the live music business.
One hurdle before a recovery is that only a fraction of Americans will be vaccinated by early 2021. Live Nation executives have stated numerous times its concert business will return to scale by the busy summer concert season — that may happen but consumers will need to feel safe to return to music venues.
A new Morgan Stanley survey found U.S. concertgoers had significant concerns about attending events even after a vaccine is widely available. In fact, the most frequent concertgoers — those who attend six or more concerts per year — harbor concerns — 20% for outdoor concert goers and 29% for indoor concerts; the figures jibe with findings in MRC Data/Nielsen Music survey in the spring that about two-thirds of concertgoers said they would attend concerts with safety measures such as pod seating, masks and temperature checks. Live Nation’s own survey found that 95% of fans globally plan to attend concerts when safety restrictions are lifted.
Since the vast majority of concerts have been postponed, not canceled, and 83% have retained their tickets instead of seeking a refund, concert revenues — for all promoters and venue owners — could return to normal by the summer. Morgan Stanley forecasts revenue will reach $7.1 billion in 2021, 61.7% of 2019 revenues, and $11.6 billion in 2022, more or less even with pre-pandemic volume. Conversations about Live Nation usually omit Ticketmaster, a more profitable business than concerts. Equity analysts at Lightshed Partners have pointed out that the revamped ticketing platform could provide an additional $125 million in adjusted operating income.
The $1 million Rapino spent on Live Nation shares — board director James Kahan and executive vp and general counsel Michael Rowles also bought roughly $110,000 and $100,000 of stock, respectively — at $39.98 per share has gained 88.9%. Little was known March 12, but now, with vaccinations inevitable and Live Nation well-positioned to last through the winter, it was a good bet — at Thursday’s valuation, he’s up $889,000.
