Entertainment Stocks Plummet On Coronavirus Fears; LYV Down 16.5% In Wednesday Trading

The fall comes after a wider stock market crash that has continued amid coronavirus fears that what is now being categorized as a pandemic by the World Health Organization will lead to a global recession.

Over the past five days, LYV stock is down 29% compared to the wider-market S&P 500’s drop of 10.4%, with Live Nation’s market capitalization now around $9 billion compared to more than $15 billion a couple of months ago when the company’s share price was north of $76. 

The stock shock comes with recent and ongoing announcements of event cancellations or postponements including Coachella and Stagecoach festivals in Indio, Calif., (pushed back to October), Pearl Jam’s North American tour, Zac Brown Band’s spring tour leg, and major metro areas in Washington and California banning mass gatherings. San Francisco’s Chase Center announced March concerts including Tame Impala and Post Malone being canceled or postponed. 

Other stocks related to live entertainment were also hit hard, including ticketing company Eventbrite (-40.66% over the last five days) and Madison Square Garden Company (-20.27%) over the same period. Notably, Ryman Hospitality Group was hit especially hard, down 35% over the last five days and 51% over the past month. RHP was down 13.5% in Wednesday trading, with a share price closing at $42.69 Wednesday, taking the company down to a market capitalization of $2.34 billion.

Zacks Investment Research chief equity strategist John Blank told Pollstar on Monday that stocks being overvalued and now being brought back down to Earth is “the story of the year” and triggered by the coronavirus fears.

“This whole coronavirus has been a very convenient excuse to take the market down where it’s supposed to be anyway,” said Blank, who noted that the price-to-earnings ratio of the current S&P 500 index is still around 16, which is historically high. “[The markets] could go down a lot from here and still not be cheap,” Blank adds. 

While the business sector of a particular company matters during a stock market downturn, such as when banks and real estate developers were hammered during the housing crisis of 2008, smaller companies tend to be hit harder than blue-chip stalwarts, such as the companies that make up the Dow Jones Industrial Average. Momentum traders also play a role, with large investors and hedge funds riding a stock for a while before triggering a selloff when a company goes below a certain price, leading to a domino effect. 

“A lot of trading in the last two years is trend trading and trend-following machines, and some people had some big money in for two or three years and are now just cashing out to make sure they still have it,” Blank says. “The momentum trading, and the hedge funds that trade to trend and don’t do really do any studying, are just trying to take money out quickly.”