SFX Investor Bails Out

Instead, it has offered to sell back the shares to SFX at cost. The offer is just the latest twist in the attempt by Sillerman to take the EDM giant private in a $5.25 per share cash buyout. After the tender offer was made,

Virtual Point Holdings and Wolverine Trading were made stock offers totaling 1,037,345 shares at a price of $4.338 each.

A holding company controlled by Sillerman purchased another $5 million worth of stock. Both investors retained a put option to sell the shares back to Sillerman at a $5.25, even if the tender offer to shareholders collapsed, according to Forbes.

However, in an Aug. 4 SEC filing, SFX revealed that Virtual Point decided July 31 to terminate its put agreement and instead sell the shares to ESFX, Sillerman’s holding company.

Though it loses a potential 21 percent gain on investment, Virtual Point is able with the new sale to “unwind a $5 million investment via a related party transaction,” according to Forbes. SFXE was trading at $3.05 per share at press time – more than 40 percent below Sillerman’s tender price, and nearly 30 percent below Virtual Point’s purchase price.

But serious questions remain about Sillerman’s ability to close the go-private deal. He’s facing an Aug. 13 deadline – already extended from 10 to 15 days by the SFX board – to disclose his financing for the tender offer or face a $31 million termination fee to SFX.

In addition, a federal court in Los Angeles rejected a motion to dismiss a $100 million lawsuit filed against him and his company by three men who claim Sillerman stole their idea to roll up several electronic dance music assets and create a company operated by them and financed by Sillerman.

Instead, the suit alleges, Sillerman created SFX and offered them no compensation or shares in the company when it moved toward its eventual $1 billion IPO. The case is scheduled for trial in October.