SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among companies in the live events space. We look at why they are compelling and why each could be a fit for a blank-check merger.
As the pandemic wanes and the world re-opens, a series of backlogs will be ready to be shaken loose. Locked-in humans have plenty of pent-up desire for some live entertainment, and many live entertainment companies have been sitting on a long pause for their fundraising plans.
Movie theatre revenues were down 80% in 2020 (although certain stocks got rocketed to the moon) and live theatre and music took a similar hit. SPACs love doing deals in sectors that are primed for a timely pop and are not likely going to ignore the summer of fun that is about to be unleashed by the previously quarantined masses.
Online ticket marketplace SeatGeek saw its rival StubHub get traded between strategic partners for $4 billion just before the pandemic hit but has not had the opportunity to take itself to the bank since.
SeatGeek has raised just under $300 million in private funding to fuel its growth since its founding in 2009, but an additional round or IPO with the virus not fully beaten would likely be risky. Meanwhile, its rival Vivid Seats has already announced a $2 billion combination with Horizon (NYSE:HZAC).
The company also has some unique ideas up its sleeve. Among them is adding a blockchain layer over its marketplace that would potentially allow it to collect a royalty every time a ticket is re-sold. Blockchain connections already potentially provide the important function of knowing for sure who ends up in each seat, which gets notoriously murky with analog methods.
In April, SeatGeek Chief Product Officer Eric Waller said it was in negotiations with NBA and NFL teams about selling tickets as NFTs. The broader NFT market may be showing signs of retreat but a courtside seat at Madison Square Garden has a lot more intrinsic value than, well, this.
In the projections released alongside its deal, Vivid Seats did not expect 2021 to quite hit “back to normal” levels. It did project that gross order volume would increase 125% year-over-year from 2020 to 2021. But, even that 2021 amount amounted to less than a third of what it turned in 2020. Vivid rather expected the full return to the crowds and mosh pits to occur in 2022.
If SeatGeek is willing to take a 2021 valuation with its selling volume similarly expected to triple in 2022, SPACs and SPAC investors are sure to be interested.
Meanwhile, Lyte may already be performing for SPACs with Social Capital joining its $33 million Series B in December 2020.
Its specialization is in what it has branded as Always OnSale ticket reservations where it sells seats at shows that are sold out or in some cases have not yet begun selling in the first place. This allows fervent fans to make sure they can attend their favorite band’s next gig, but also gives speculators a shot at monetizing the buzz before the ticket supply is on the market. This also fulfills some needs on the other end of the market where the market standard has been “no refunds” for those unable to attend events.
Before the virus that cloistered the world, Lyte saw five-fold year-on-year sales growth in 2019. It also did the best it could to stay tight with event organizers through the pandemic, distributing all profit from sales to venue partners or trade associations in April 2020.
Among the more prominent events that Lyte has partnered with, Coachella, the Newport Folk Festival and New York Comic Con should be lit in 2022, as they say. Lyte could potentially beef up those connections with a SPAC combination involving entertainment industry specialists. Newbury Street (NASDAQ:NBST) stands out as a potential fit with Chairman Matthew Hong having spent 11 years as COO of Turner Sports, managing the network’s relationships with various sports leagues and event organizers.
SPACs have so far struck out in reported attempts to take top franchises from major sports public, but there is plenty of upside and value in growing alternative sports.
The Raine Group and Causeway Media Partners created Thrill One as a platform company in January 2020 that would bring together a number of action sports and media operations. It combined Street League Skateboarding with dirt-bike event organizer Nitro Circus and off-road racing league Nitro Rallycross (NRX). The Raine Group was also an investor in Draft Kings (NASDAQ:DKNG), whose successful SPAC deal was a major propellant for the new SPAC world we have today.
In 2020, the group planned 30 events and 100 hours of live sports programming, but likely had to tailor that back as the pandemic nixed everyone’s outdoor adventures. That nonetheless represents Thrill One’s potential in the post-pandemic world and its properties include about 40 million followers across its various brand pages.
Alan Kestenbaum, who is both Chairman and CEO of Sports Ventures (NASDAQ:AKIC) and a minority owner in the Atlanta Falcons, could likely think of some growth ideas for the venture.