April 23, 2021

Breakingviews: SPAC ticket deal is a bet on pent-up partygoers

by Breakingviews.

Vivid Seats is preparing for a rush to the gates. The live-event ticket merchant has agreed to be acquired by a blank-check firm led by Los Angeles Dodgers baseball team owner Todd Boehly. Rising market values of Live Nation Entertainment and Eventbrite augur a financial fiesta.

The deal announced on Thursday sees Vivid Seats, which sells tickets to everything from Coldplay concerts to Dallas Cowboy football games, merge with special purpose acquisition firm Horizon Acquisition, valuing the business at just under $2 billion in equity value. Vivid Seats gets $677 million to pay down debt, both from the SPAC and from a side-deal with investors including Fidelity Management.

Where many SPAC targets are growth companies – some of them not yet even making any revenue – Vivid Seats is more of a recovery story. It had $128 million of EBITDA before the pandemic. Then as live events dried up, so did its finances. Revenue fell some 75% to $115 million in 2020 and adjusted EBITDA collapsed to $5 million. The company slashed marketing and reduced overhead expenses by 50% to mitigate the effects Covid-19.

Events aren’t quite back with a vengeance, but investors seem confident they will be. Consider the values of Live Nation and Eventbrite. Their stock tumbled by more than 70% and 80% respectively from February to April of last year. Both have since snapped backed. In a year, shares in Live Nation and Eventbrite have more than doubled. Vivid Seats’ enterprise value in the deal, at 19 times estimated 2022 EBITDA, is on a par with Live Nation’s.

Still, the ticket business is cut-throat. In 2019, the U.S. Justice Department found that Live Nation had strong-armed venues that hosted its roster of touring artists into signing contracts with its ticket-selling subsidiary Ticketmaster. Even if event attendance booms, ticket sales will still face sharp competition. Having a new injection of cash does, though, at least give Vivid Seats a spot on the front row.

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BREAKINGVIEWS

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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