Live Nation Stock on the Rebound
While unemployment continues to rise week by week and economic indicators take nosedives due to the weeks and months of COVID-19 quarantines, the stock market staged a quick turnaround from its late March lows. This has led to some questioning of the market’s rebound in the face of a down economy.
There are several potential explanations for the optimism in the stock market from the leadership of “quarantine immune” tech companies to stimulus check injections. Another reason is that there is really nowhere else to invest money right now for reasonable returns with interest rates being slashed. Ultimately, a large reason may be that in down economies the stock market can at times actually perform at its best. The fact is the economy was and is in trouble with many forms of production and consumption shut down, but with states beginning to reopen that may be changing. And the stock market is highly efficient at looking ahead and typically prices in expectations about 12 months out. Barring a second major wave of infections and quarantines, the current positive news surrounding the re-openings and COVID-19 treatments/vaccines are driving the stock market’s optimism right now.
Live Nation stock (LYV) has largely mirrored the above pattern of the larger stock market. After bottoming out at a share price of $21.70 on March 18 only a month after hitting a high of $76.60, Live Nation has rebounded 133% to $50.66 at market close on June 1. The drop is easily explainable given the postponement and cancellation of live entertainment events caused by stay-at-home orders. The subsequent rise is an effect of the market optimism looking forward as well as the company’s recent actions led by President and CEO Michael Rapino.
Given the unprecedented circumstances, Live Nation and other ticket marketplaces quickly faced growing criticism of ticket refund policies early on in the chaos of the pandemic. Rapino and his team worked to get Live Nation’s new Ticket Refund Plan in place. With a solution prepared for the immediate problem, Rapino and his team then turned their attention to the future.
Just like many companies facing the harsh reality of the COVID economy, Live Nation needed quick pivots for the next 6-18 months. During Live Nation’s first quarter earning call, Rapino unveiled plans for virtual performances, drive-in shows, reduced capacity concerts, and faster returns in areas less impacted by the virus. Cost-cutting measures also included executive salary reduction of up to 50%, establishment of new credit lines for liquidity, as well as furloughs and hiring freezes. Rapino’s dedication and commitment to the company and the industry at large was exemplified in his foregoing of his 2020 salary, purchasing $1 million of Live Nation stock, and establishing global relief fund Crew Nation to support concert crews with a $10 million pledge from Live Nation.
The combination of new revenue models and cost-cutting measures along with a reopening society are pointing to the eventual return of live entertainment which in turn explains the boost in Live Nation stock to date. But is the rise sustainable? Barring the return of a major second wave of COVID-19 infections and national lockdowns, some signs from institutional investors and indicators remain bullish on the stock. Following March’s rapid dip in the stock market, the stocks of several high-quality companies could be bought at unprecedented discounts, including Live Nation. These prices had not been seen since years earlier, and even though the short-term prospects were muddled, the long-term upside with an eventual return to normalcy were practically guaranteed. The highly active sovereign wealth fund of Saudi Arabia bought a 5.7% stake in Live Nation by purchasing its stock on the open market in April. The firm’s stock is also attracting more interest from hedge funds recently.
During these unprecedented times, the fortunes of most companies and industries are highly dependent on the world avoiding any major setbacks in its fight against the COVID-19 pandemic. While that is largely outside of many firms’ control, Live Nation with Rapino at the helm has taken measures to control what it can and better position the live entertainment industry for the future. Once there is a return to normalcy, artists and fans alike will be greatly appreciative of their efforts.