Year In Review: Business – Bulls And Bears

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Bulls On Broadway: Live business stocks were mostly up this year, with Live Nation gaining as much as 58 percent since April.

2018 was a bumpy year for music-related stocks. Two companies went public, skyrocketed, and fell back to earth. In contrast, live music stocks showed a sustained demand for concert experiences – except for a blip caused by an article alleging industry giant Live Nation engaged in anti-competitive behavior. 

Stocks soared in early 2018 following President Trump’s signature on the Tax Cuts and Jobs Act in December 2017. The bill lowered corporations’ tax bills and led to record profits. Strong GDP growth and low unemployment also buoyed the markets. Then stocks turned negative in the second half of the year. Any downturn is complicated, but some culprits stand out. First, the impact of tax cuts was overstated. Many companies simply returned money to shareholders through stock buybacks. Also, Trump’s trade disputes with China, Canada, and Mexico have made investors uneasy. And numerous signs, such as declines in consumer optimism and business investment, suggest the economy is cooling. 

Some music stocks seemed insulated from uncertainty. Live Nation is attractive to investors because it’s the right kind of company at the right time. One school of thought says people value experiences more than ownership – that’s becoming true with recorded music – and some market research backs that up. In any case, Live Nation’s appetite for growth is insatiable, and Wall Street usually rewards companies that grow wisely through acquisitions. Each additionally acquired concert promoter or venue amplifies a multi-pronged business model that effectively uses concerts to sell tickets, ads and beer.  “It’s kind of a perfect storm,” said Brandon Ross, an analyst at BTIG. 

Drama arrived in March when a New York Times report claimed Live Nation engaged in dirty tricks with competing promoters. Such anti-competitive behavior would violate parts of its agreement with the Department of Justice that green-lighted the 2010 merger with Ticketmaster. Live Nation shares fell 13 percent in the two days before Ticketmaster’s vehement denial and defense – led with a response written by Ticketmaster President, Jared Smith discussing investments the company has made into its products and its adherence to a DOJ consent decree – gained traction. 

Early April was the time to buy LYV stock: Live Nation stock has since gained as much as 58 percent. 

Facing a cutthroat business, ticketing company Eventbrite spent the last 15 months buying a competitor and having an initial public stock offering. The San Francisco-based company acquired Ticketfly from Pandora for $200 million in 2017, providing a music-focused stable of clubs, theaters, and festivals. In September, a successful IPO raised $230 million. The following day, trading began at $36, or 60 percent above the IPO price. But the afterglow was short-lived and the share price slid 29 percent over the next five weeks. Eventbrite shares closed at $30.24 on Dec. 7, a third below its high mark a week after the IPO. It was a gamble, and the second half of the year became a difficult time for both tech stocks and IPOs. “We knew what we were getting into,” CEO Julia Hartz said in a CNBC interview. About half of Eventbrite’s share price decline was secular. Since the IPO, the NASDAQ exchange is down 10.5 percent to Eventbrite’s 21-percent drop.

Two small giants, The Madison Square Garden Company and Ryman Hospitality Properties, had strong years. In nine months, MSG’s entertainment division – namely, celebrated venues like Madison Square Garden and the Forum – grew revenue 38 percent to $508.2 million. A nice gain, but another factor gave MSG investors a wild ride. MSG shares soared 21 percent after its late June announcement of a possible spin-off of its sports division. Cleaving its two divisions would presumably unlock value currently not recognized – and investors want to share the upside. MSG confirmed the spinoff in October yet the stock has given back all but two percentage points. Ryman shares rose an unassuming 6.5 percent this year. Music is a small but important component; entertainment helps drive the 88 percent of revenue Ryman gets from hospitality – hotels, mainly. 

Digital music was a mixed bag. Spotify went public in April. Enthusiasm carried the share price from a $165.90 opening price to a stratospheric high of $198.99. Two earnings reports, along with Apple Music’s ascendency, brought the share price down to $135.50 by Dec. 7, 18.3 percent below the IPO price. On the other hand, SiriusXM Radio rose 19.2 percent. Bleeding money a decade ago, SiriusXM posted a net profit of $924.8 million in the first three quarters. If not for its acquisition of Pandora, SIRI’s stock price could have been up 50 percent.