Sillerman’s SFX Deadline Passes

SFX Entertainment CEO Robert Sillerman’s deadline to put up his financing of the tender offer to take the company private, or pay up a $31 million reverse termination fee to SFX, came and went Aug. 13 with no announcement by press time.

Afrojack (center) is flanked by SFX Entertainment board members Shelly Finkel (L), Robert Sillerman and Mitch Slater (R) to ring the closing bell on the NASDAQ stock market in celebration of its Oct. 9 initial public offering.

As the minutes and then hours passed with no word from SFX, its share price began circling the drain into less than $2 per share territory.  Sillerman’s tender offer to shareholders for those he doesn’t already own is $5.25. Shares that traded at $7.25 in the last 52 weeks hit a low of $1.93 during the deadline day.

SFXE debuted on Nasdaq with an IPO that raised some $260 million and a share price of $13, according to the New York Times.  Sillerman made the tender offer to take the company private, which was announced in May.

Under the terms of the “go shop” period, SFX had the right to seek competing offers until July 24. Sillerman and the board valued a deal at $774 million including SFX’s debt, its cash and cash equivalents, stock options and other items.

Market watchers may not have been showing much confidence in Sillerman’s ability to close the deal, but the silence could also have meant other forces were at play – such as the company’s interest in considering the spinoff of some of its parts for sale.

But in the week before Sillerman’s deadline to prove he can finance his own deal, Virtual Point Holdings, one of two investors offered shares of SFX in June, offered to sell back the shares to SFX at cost.

The offer was just the latest twist in the attempt by Sillerman to take the EDM giant private. 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.

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.