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Business News Live Business
SFX investors reach deal with former dance music firm’s directors
By Chris Cooke | Published on Monday 22 July 2019
One of the lawsuits that followed the collapse of the short-lived dance-music business SFX has been settled. A group of shareholders sued four directors of the SFX company – including founder and CEO Robert FX Sillerman – over allegations said directors sought to fraudulently boost the firm’s share price before declaring bankruptcy.
Sillerman hoped to repeat his previous successes in live music when he launched the second iteration of his SFX business in 2012. His original music company had morphed into Live Nation. The second outing sought to capitalise on the dance music boom that was underway at that time. He bought up a whole load of festivals and other businesses in the dance music sector, and then floated the company in 2013. But it all came tumbling down three years later.
Before it went into bankruptcy in 2016, there was a period when Sillerman was seeking to take SFX back into private ownership. Even before the subsequent collapse of the company, some of the firm’s shareholders alleged that that was in fact a ruse undertaken to falsely boost SFX’s share price. Sillerman, it was claimed, wanted to get the share price up so he could renegotiate the company’s debts, or raise more capital, or find a buyer for the whole business.
Those allegations resulted in a class action led by one investor in particular, the Guevoura Fund Ltd, which targeted directors D Geoffrey Armstrong, John Miller and Michael John Meyer as well as Sillerman. The lawsuit was actually filed in 2015. Plaintiffs then had to negotiate the bankruptcy of SFX in 2016 and, a year later, of Sillerman himself.
According to Law360, last week it was announced that a settlement had been reached with the four former SFX directors. Under the deal, none of the four men will admit to any wrongdoing, but each will each pump money into a $7.5 million fund to compensate investors. The deal now needs court approval.
SFX eventually came out of bankruptcy, of course, and continues to operate under new management as LiveStyle.
