Dance media and events conglomerate SFX—owner of Beatport, Made Event, 75% of ID&T and 50% of the Rock in Rio brand—has been having a rough time. Chairman Robert Sillerman's plan to privatize the publicly-traded company has been thwarted by plunging stock prices, and despite his assurances to the contrary, a drawn-out, public debacle has left the company teetering on the brink of dissolution.
This week, after the company's stock price closed at an all-time low of $0.45 on September 10, law firm Abby Spanier, LLP filed a class action lawsuit on behalf of shareholders who invested between February 25 and August 17, 2015.
A release for the lawsuit states that Sillerman "knew or recklessly disregarded and failed to disclose that he did not have any financing in place at the time he made his proposal."
It also stated that "given the company's growing debt and decreasing margins, it was not feasible that Sillerman was ever going to buy the company and, with the aid of the other defendants, Sillerman initiated and maintained a sham process designed to lure third party offers, in an attempt to shed his failing investment before the truth about the deterioration of the company could no longer be concealed."
SFX stock peaked at $11.59 a share in December of 2013, shortly after going public; by early 2015, when Sillerman publicly stated his intention to purchase the rest of the company, it had dropped to $5.25.
Possible explanations for the plummeting value point blame at top-level executives, including Sillerman himself. Analyst Richard Tull told Forbes last month: "SFX Entertainment is likely well-managed on the festivals and business unit level and the company's shortcomings, in our view, appear to be with holding company management and its board of directors, which have arguably destroyed shareholder value."
Speculation that Sillerman was either unable to raise the funds or was playing chicken with the valuation in the hopes of cutting a deal gained steam this summer in media outlets like Billboard and Resident Advisor. After Sillerman's failure to meet an August 13 deadline to come up with the cash to go private, SFX's valuation has continued to drop as deep-pocketed saviors seem in short supply.
A statement released in mid-August suggests that SFX will continue to seek investment until October 2nd. Regardless of how the situation unfolds, Sillerman now seems far from his "$1 billion plan to conquer the world of dance music," as stated on the cover of Billboard magazine in 2013.