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Saudi Arabia buys 5% of Live Nation

By Chris Cooke | Published on Tuesday 28 April 2020

The country of Saudi Arabia has bought approximately $500 million of stock in Live Nation giving the nation’s Public Investment Fund a 5.7% stake in the live entertainment giant, making it the firm’s third biggest shareholder overall.

Live Nation’s share price has taken a hammering since it became clear in mid-February that the COVID-19 pandemic was going to result in major lockdowns all across the world. All of the company’s core businesses – concert promotion, venue management and ticketing – have been majorly hit as the live entertainment sector has gone into full-on shutdown. And even the other areas where it operates – like merchandise, brand partnerships and artist management – have been negatively affected by the COVID-19 crisis.

Earlier this month Live Nation announced a series of measures to help it navigate those COVID-19 challenges, including an amendment to its existing credit agreement, the completion of a new revolving credit facility, and a cost reduction and cash management programme. The latter included hiring freezes, renegotiating rents where possible, utilising government schemes for furloughing staff and senior execs taking pay cuts.

However, CEO Michael Rapino – who will forego his salary entirely during the crisis – was keen to stress that the long-term future of the company remains bright. Despite the frustrating (if understandable) lack of clarity over how long the live entertainment sector will be in enforced shutdown, and the added uncertainty over how quickly audience members will return even once government-instigated restrictions are no longer in place.

He told investors: “The live entertainment industry has delivered incredible global growth for over 20 years, which speaks to the great passion and resilience of fan demand. With this additional liquidity, the flexibility in our debt covenants, and cost-cutting efforts, we believe that Live Nation has the financial strength to weather this difficult time. We will be ready to ramp back up quickly and once again connect audiences to artists at the concerts they are looking forward to”.

While the impact of COVID-19 on live entertainment could run for much longer than originally thought, for those playing the long game Live Nation shares do still seem like a good bet. Not least because smaller and middle-level players in live entertainment and ticketing are much more likely to go under entirely as a result of COVID-19. Which means, ultimately, the pandemic could further extend Live Nation’s already significant dominance over the live entertainment sector, and especially in markets like the US and the UK.

This is presumably why the Saudi Arabia Public Investment Fund has bought up so many Live Nation shares now. The number was sufficient enough that a filing about the purchase was legally required to be made with the US Securities & Exchange Commission.

The fund said last week that the entertainment sector was one of its current priorities. In the past, some in the entertainment industry have been nervous about accepting investment from Saudi Arabia because of the country’s politics.

Those concerns were ramped up last year following the October 2018 murder of Saudi Arabian dissident and Washington Post columnist Jamal Khashoggi, who was killed by agents of the Saudi government at the country’s consulate in Istanbul. In the wake of that scandal, talent agency group Endeavor cancelled a $400 million investment in its business by the Saudi Public Investment Fund.

Those controversies, however, can’t stop the fund from buying shares on the open market in publicly listed entertainment companies, as it has now done with Live Nation. Though, presumably aware of the ongoing concerns in parts of the music and entertainment community, the fund stressed that it sees its recent purchase as a passive stake in the Live Nation company and it won’t seek to exert any control over the business.

Although now the third biggest Live Nation shareholder overall, in terms of stake and influence the Saudi Arabia PIF is still a long way behind the biggest stockholder of them all: that being American communications and entertainment giant Liberty Media, which controls 33% of the Live Nation company.

Last week, Liberty announced that it was reshuffling its investment portfolio so that its Live Nation shareholding would shift from its Formula One Group to its Liberty Sirius XM Group, which seems like a more logical place for its stake in the live entertainment giant to sit. Liberty Sirius XM also has a controlling stake in the US-based Sirius XM satellite radio company, which in turn owns American streaming service Pandora.

Although, perhaps more interestingly, the Liberty Sirius XM Group also has an albeit small shareholding – currently about 5% – in American radio giant iHeartMedia. It’s been known for some time that Liberty would like to increase its stake in iHeart.

The main reason that is interesting is because iHeartMedia used to be known as Clear Channel and, at one point in its history, Clear Channel was also a major player in live entertainment. But the live entertainment side of Clear Channel was spun off as a standalone company in 2005 that became known as, well Live Nation.