Hatchet Job On SFXE Takes Stock To New Low, Reveals Key Weakness
On Wednesday an unidentified SFXE short-seller writing for Seeking Alpha took already tumbling shares in SFXE to a new low. The negative analysis was partly based on the fact that no public announcement of CEO Robert F.X. Sillerman following through on a plan to buy stocks in his own company had been made to date. Later that day a press release was issued by SFX Entertainment stating that Sillerman that day completed buying a bunch of stock and he wants a whole lot more. SFXE has since recovered to its previous low point.
The unidentified writer, who we'll call ShortSeller, had a great title for his assault on SFX Entertainment's stock:
" SFX Entertainment: Playing House Music In A House Of Cards"
Check it out for yourself if you wish. Most of the claims were undermined in the early comments. There are some technical issues I don't fully understand so I'll just focus on Robert F.X. Sillerman who ShortSeller claimed to believe hadn't filed any actual purchases of stock because "SFXE raised debt because it's burning so much cash."
Given Seeking Alpha's prominence and the fact that Sillerman had yet to publicly follow up on his announcement from August that he would be acquiring up to 2 million shares of SFXE, this part of ShortSeller's argument was quite compelling and the market responded dropping the stock to a new low of $3.52 during trading on Wednesday.
That same day, SFXE made the following announcement:
"While it is the Company’s policy to not comment on investment opinions and anonymous online posts, SFX’s Chairman and CEO, Robert F.X. Sillerman, today completed the purchase of 575,000 shares of the Company’s common stock in two transactions that had been in negotiation prior to the publication of an online post today…In addition, Mr. Sillerman has filed a stock purchase plan under SEC Rule 10b5-1 to purchase up to an additional three million (3,000,000) shares of the Company’s common stock following the release of its third quarter operating results which will occur in mid-November."
And if he follows through on this schedule he'll have bought more than the 2 million shares he discussed in August that, unless I'm totally misreading things, he had a year to buy.
So the short seller likely made money, the stock's recovered to its previous new low and Sillerman is making strong moves to support the company.
Not really a win/win. ShortSeller exploited the vulnerability of SFXE in the marketplace. They're a relatively long term play facing a public market that doesn't think that way. Which makes for a huge upside if SFXE turns things around before they get delisted, a fate it was still a bit difficult to imagine before this week.
[Photo: Axe Murder courtesy Alper Çuğun.]
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