Few imaginable things could impact the live-entertainment business as much as a global pandemic, and not surprisingly, Live Nation, the world’s largest concert promoter, has taken a beating on the stock market over the past two weeks. On a particularly rough Wednesday, its share price dropped 33% at one point in the afternoon — down more than 61% from its year-over-year high last month — before recovering after President Trump’s aid package to U.S. taxpayers boosted the market and it finished the day down 13% at $29.50.
Live Nation was not alone, as Madison Square Garden Company shares dropped 10% on Wednesday and German live-entertainment giant CTS Eventim fell nearly 6%.
Yet Live Nation fought back on Thursday, starting low but pushing up as high as 14.25% at midday; MSG was up nearly 5% and Eventim almost 10%. However, the market is extremely volatile and things could easily swing the other way at any moment.
“There is an ongoing question as to how long social distancing will last — even epidemiologists don’t have an exact answer. However, Live Nation should be able to manage until the time touring resumes and by virtue of their relative size and resources should be in position to take further market share at that time,” LightShed Venture Partners’ Brandon Ross told Variety.
A rep for Live Nation told Variety: “Artists and fans will be eager to connect at concerts and festivals when the time is right, and as shows ramp back up, our stock will follow. We’ve had nine consecutive years of growth, which speaks to the growing global demand for live events and our proven business model. Our steady success has set us up with a strong balance sheet and we are ready to adapt to do what’s right for our industry, employees, artists and communities during this time. While uncertainty is impacting the overall market, one thing we know for sure is that the innate human love for live music isn’t going away.”
The coronavirus pandemic and the stay-at-home directives from government have decimated the live-music industry at what is usually the beginning of the busy summer festival season. While some analysts predict that lockdowns could begin to loosen up in about two months, based on patterns in China and Europe, we could be looking at a long wait before the concert industry begins to revive. U.S. government officials have warned that the pandemic could last as long as 18 months, with several waves of infections.
“It happened so fast there’s a lot of confusion,” said John Tinker of Gabelli & Company. “Live Nation has been one of the best stock stories for quite awhile, the Street likes them, they’ve got international growth, but suddenly you can’t tour and it gets very complicated. But when things come back, and they’re apparently starting to come back in Asia, what form will they take?”
While Live Nation initially downplayed the threat of the virus when it first reached pandemic proportions in China and Europe, CEO Michael Rapino resorted to more dramatic means last week when he personally bought up $1 million in Live Nation shares, and two other top executives made six-figure investments.
While that sent a strong signal to the industry, it was little salve to investors who had already been clobbered, let alone the thousands of literal “gig economy” workers, such as touring, venue and hospitality personnel, who suddenly found themselves without prospects of income just as the season was expected to get started.
However, Doug Arthur of Huber Research played down worries about the company’s long-term prospects. “Concerns over breaking debt covenants is overblown,” he told Variety. “Liberty Media owns almost 35% of the stock and therefore can help martial the company though this period, if need be. I am less worried about debt than I am about near-term revenues: no events, no revenues.”
In a statement Wednesday, LightShed Venture Partners noted that it had given Live Nation a “buy” rating, calling it a “Rare Combination of Growth and Safety,” but noted: “It is clear, for now at least, that Live Nation is no longer ‘safe’ and will likely not be growing in 2020. We have been introduced to a new behavior, ‘social distancing,’ which has meant the cancellation of all public gatherings in the U.S. until at least mid-May. Consequently, Live Nation’s business is temporarily hanging in the balance. The stock is continuing to make new lows with investor uncertainty about when touring will resume, and what it means for the company’s balance sheet, profitability and the long-term viability of the business. We are clearly not soothsayers, but we believe the stock is now far over-sold.”
However, it noted, “we believe investors’ biggest fear – the possibility of a tripped maintenance covenant in the company’s credit agreement – is far overblown. It would stand to reason that the company is already actively working to undo that risk. And, even in worst-case 2020 scenarios, we see the company rebounding post-coronavirus to a stronger position than ever, especially as competition wavers. Investors who have the stomach to step-in now should be rewarded.” It spoke generally optimistically about the company’s long-term prospects “even if it loses the entire summer.”