Almost a year to the day after electronic dance music and festival company SFX Entertainment went public, it has become the public target of an activist short seller.
The investor, Alpha Exposure, said Monday on Seeking Alpha that it was shorting SFX, which owns dance music festivals such as Electric Zoo and Tomorrowland as well as an online DJ store, due to the company being "over-levered, unprofitable, and burning through its cash reserves at an alarming rate" and that this plus its badly rated debt makes it "nearly a coin flip as to whether or not the company defaults" and that its "equity is worthless."
The news sent SFX's stock plunging nearly $1 per share, down from around $4.40 to $3.50 per share on Wednesday.
Indeed, it's been far from a year of PLUR for the struggling company's stock. After IPOing around $11 per share, SFX shares have steadily declined in the last year to less than half that before Alpha Exposure's short announcement.
And in March, CEO Robert Sillerman, who previously led the charge in consolidating regional concert promoters into what would later become Live Nation, displayed increasingly bizarre behavior—flipping off photographers and grabbing his crotch while deplaning a private flight to Miami—that caused analysts to question his sanity.