This whole SFX saga is getting to the point where I need a diagram. I haven’t made one yet. I’ll get one made this weekend. I’m at the Edinburgh Festival. I’ll get someone to chalk it on the cobbles and take a photo of it.
You may remember that – in the middle of SFX founder Robert Sillerman trying to take his EDM powerhouse back into private ownership by buying back all the shares he doesn’t currently control – in June the company then sold $10 million in stock to two other parties, Wolverine Flagship Fund Trading Limited and Virtual Point Holdings LLC.
In those deals, the two firms paid $4.34 a share, which seemed like a very good arrangement – for them – given that Sillerman was already offering to buy back each and every SFX share out there at $5.25 a pop. Meaning that once the Sillerman buy-back deal got full approval, the two new equity holding vehicles would each make a quick tidy profit. Meanwhile SFX got some handy short term cash flow out of the arrangement, it seemed.
But now, according to Forbes, Virtual Point Holdings has already sold its SFX shares to another Sillerman company at the price it originally paid for them, ie $4.34. Which may be somewhat ahead of what they’d get for that stock on Wall Street just now – where SFX’s share price is just over $3 – but it’s quite a bit lower than the $5.25 offer that is meant to be on the table.
As previously reported, earlier this week SFX asked its founder and CEO to prove within a fortnight that he had the finance in place to fund his buy-back plan. There was quite a bit of resentment on Wall Street about Sillerman’s buy-back bid to start with – he having only floated SFX in 2013 – though recent developments have led to more resentment. And confusion. The latest share transaction is, in Forbes’ words, “a puzzling move”.
All eyes will now be on a quarter two SFX earnings report that is due to be made public next week. Meanwhile much chatter continues in the record industry about the announcement earlier this week by SFX’s digital music store Beatport that it won’t be able to pay labels their quarter two sales revenue while Sillerman’s buy back project is going through the motions.
For indie dance labels with tight cash flow, a delay in what is likely a significant revenue stream is a big hassle. Criticism of the payment delay and the way Beatport communicated it heightened yesterday, in part because of speculation that the majors were paid their sales income, and it’s only the indies which are being made to wait.
As previously reported, independent distributor Believe said yesterday that it would pay its clients any Beatport income they were due anyway, even though it awaits payment from SFX. And yesterday another distributor with an extensive dance music client base, EPM, announced it was doing the same.
The firm’s Jonas Stone said: “As a digital distributor, publisher and fellow underground dance music label we understand only too well of the reliance on these payments to keep everyone’s label running where cashflow is often tight. Whilst we advance these payments to our label partners, Beatport remains a key sales platform for everyone in the dance music community and we look forward to them being back on track in the very near future”.
This article, More strange goings on with SFX shares, as Beatport payment delays continue, first appeared on Complete Music Update.