Music Stocks
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Music stocks mirrored the poor start to 2024 seen in markets around the world, but K-pop giant HYBE bucked the trend with a 7.9% gain to 252,000 won ($191.67) this week. HYBE made the news multiple times during a relatively slow, holiday-shortened week — though none of it was the type of financial news that […]
The Billboard Global Music Index — a diverse collection of 20 publicly traded music companies — finished 2023 up 31.3% as Spotify’s share price alone climbed 138% thanks to cost-cutting and focus on margins. Spotify is the single-largest component of the float-adjusted index and has one of the largest market capitalizations of any music company.
The music index was outperformed by the tech-heavy Nasdaq composite, which gained 43.4% with the help of triple-digit gains from chipmaker Nvidia Corp (+239%) and Meta Platforms (+194%). But the Billboard Global Music Index exceeded some other major indexes: the S&P 500 gained 24.2%, South Korea’s KOSPI composite index grew 18.7% and the FTSE 100 improved 3.8%.
Other than Spotify, a handful of major companies had double-digit gains in 2023 that drove the index’s improvement. Universal Music Group finished the year up 14.7%. Concert promoter Live Nation rode a string of record-setting quarters to a 34.2% gain. HYBE, the increasingly diversified K-pop company, rose 34.6%. SM Entertainment, in which HYBE acquired a minority stake in March, gained 20.1%.
A handful of smaller companies also finished the year with big gains. LiveOne gained 117.4%. Reservoir Media improved 19.4%. Chinese music streamer Cloud Music improved 15.8%.
The biggest loser on the Billboard Global Music Index in 2023 was radio broadcaster iHeartMedia, which fell 56.4%. Abu Dhabi-based music streamer Anghami finished 2023 down 34.8%. After a series of large fluctuations in recent months, Anghami ended the year 69% below its high mark for 2023. Hipgnosis Songs Fund, currently undergoing a strategic review after shareholders voted against continuation in October, finished the year down 16.6%.
Sphere Entertainment Co., which split from MSG Entertainment’s live entertainment business back in April, ended 2023 down 24.4%. Most of that decline came before the company opened its flagship venue, Sphere, in Las Vegas on September 29, however. Since U2 opened the venue to widespread acclaim and earned Sphere global media coverage, the stock dropped only 8.5%.
For the week, the index rose 1.1% to 1,534.07. Fourteen of the index’s 20 stocks posted gains this week, four dropped in price and one was unchanged.
LiveOne shares rose 15.7% to $1.40 after the company announced on Friday (Dec. 29) it added 63,000 new paid memberships in December and surpassed 3.5 million total memberships, an increase of 29% year over year. iHeartMedia shares climbed 14.6% to $2.67. Anghami continued its ping-pong trajectory by finishing the week up 16.9%.
Deezer shares fell 6.4% this week after France’s National Assembly approved a 1.2% tax on streaming revenue on Tuesday (Dec. 19). The new tax, which is meant to support local cultural programs, taxes effect in January and will be owed on top of existing tax obligations.
Deezer CEO Jeronimo Folgueira called the tax “the worst possible outcome of all the different scenarios” the company faced from the French government. “Adding taxes is the worst way of trying to support the industry,” he told Billboard. France is Deezer’s home and largest market, accounting for roughly 60% of its revenue in the first nine months of 2023, according to the company’s latest earnings report.
Spotify immediately pulled sponsorship support for two local music festivals to help offset the additional tax burden. France is not as important to Spotify as to Deezer, however, and the new tax was probably not a factor in the 1.3% decline in Spotify’s share price this week. Spotify would be far more affected if other countries followed France’s lead — a possibility raised by Deezer’s Folgueira. “It sets a very dangerous precedent for other markets,” he warned.
SiriusXM investors were unfazed by the news that the New York attorney general’s office had sued the company for allegedly making customers go through a “burdensome” cancellation process. The satellite radio company’s stock finished the week up 1.3% to $5.47 despite a lawsuit that alleges SiriusXM “deliberately wastes its subscribers’ time even though it has the ability to process cancellations with the click of a button.” The company said it will “vigorously defend against these baseless allegations” that “grossly mischaracterize” its practices.
The Billboard Global Music Index fell 0.3% to 1,517.98, lowering its year-to-date gain to 30.0%. Nine of the index’s 20 stocks posted gains this week; 11 stocks ended the week in negative territory.
Shares of streaming company LiveOne gained 10% to $2.21 after the company on Tuesday (Dec. 19) raised its guidance for revenue for its fiscal year ended March 31, 2024, to a range of $118 million to $120 million, up from $105 million to $110 million. The company also said that it’s finalizing a restructuring of its merchandising business, first announced on Dec. 14, that will reduce headcount by 75 to 100 staffers and result in $5 million to $10 million of cost savings.
Three other companies in the Billboard Global Music Index posted gains of 5% or more this week. Sphere Entertainment Co. rose 5.4% to $34.32. Warner Music Group improved 5.1% to $35.29. And K-pop company SM Entertainment gained 5% to 90,100 won ($69.32).
Major indexes fared better than music stocks as investors reacted positively to Friday’s announcement by the Federal Reserve that U.S. prices rose less than expected in November. In the United States, the Nasdaq composite gained 1.2% to 14,992.97 and the S&P 500 improved 0.8% to 4,754.63. In the United Kingdom, the FTSE 100 rose 1.6% to 7,697.51, while South Korea’s KOSPI composite index climbed 1.4% to 2,599.51.
Hipgnosis Songs Fund capped off an eventful 2023 by lowering the value of its music catalog amidst internal conflict over exactly what the company’s star-studded catalog is worth.
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The publicly listed royalty fund said its operative net asset value per share declined 9.2% to $1.74 on Sept. 30 from $1.92 on March 31, according to its half-year earnings report on Thursday (Dec. 21). The sharp decline stemmed primarily from a “material reduction” in expectations for CRB III and CRB IV income.
The company’s self-reported valuation has long exceeded the value implied by its share price and estimates of equity analysts. In recent months, Hipgnosis Songs Fund has proposed and completed partial catalog sales at discounts to their net asset values.
New board chair Robert Naylor‘s statement to investors described a strained relationship with the fund’s investment advisor, the Merck Mercuriadis-led Hipgnosis Song Management, over the valuation of the five-year-old company’s catalog that includes stakes in songs by Neil Young, Journey and Fleetwood Mac.
Two days earlier, the board postponed the release of half-year earnings after the investment advisor produced a “heavily caveated” opinion on the catalog valuation provided by independent firm Citrin Cooperman that was “materially higher than the valuation implied by proposed and recent transactions in the sector.”
Internal conflicts continued while the results were delayed. According to Naylor, the board’s request of Hipgnosis Song Management about “the matter to be published on the Company’s website in order to provide transparency for shareholders” was rebuffed “under the confidentiality clauses of the Investment Advisory Agreement.”
On Thursday, Naylor urged Hipgnosis Songs Management to provide an opinion on the valuation of Hipgnosis Songs Fund “without caveats” to provide greater transparency to shareholders. In the absence of a caveat-free opinion, the board urged investors to use “a higher degree of caution and less certainty” than normal when considering its fair value and operative NAV.
Hipgnosis Songs Fund shares fell 1% to 0.70 GBP on Thursday.
Gross revenue from continuing operations declined 26.9% to $63.2 million from $86.4 million in the six-month period ended March 31, 2023.
Net revenue from continuing operations declined 29.7% to $54 million from $76.8 million. About half of the decline came from a $11.9 million reversal of accrued royalties in October. Excluding those accrued revenues, net revenue grew 14% to $65.8 million.
Pro-forma annual revenue (PFAR), which measures gross royalties received and excludes revenue accruals, grew 10.4% to $64.9 million.
Following shareholders’ vote against continuation at the annual general meeting on Oct. 26, Hipgnosis Songs Fund transformed its board of directors by naming Naylor to succeed Andrew Sutch as chairman and adding Francis Keeling, a former Universal Music Group executive, and Christopher Mills, CEO and investment manager at North Atlantic Smaller Companies Investment Trust, to replace Andrew Wilkinson and Paul Burger, both of whom left prior to the annual general meeting.
The new board undertook a strategic review and named Shot Tower Capital as lead advisor to conduct due diligence on the catalog. On Thursday, Naylor said he was pleased with the strategic review’s progress thus far. “This process will help the new Board bring forward proposals for delivering value to shareholders,” said Naylor.
But Naylor also described “ongoing failures in the financial reporting and control process” since he joined the board. “Whilst we consider substantial progress has been made in identifying and rectifying these issues,” Naylor added, “we have had to suspend the dividend for at least the remainder of the year in order to ensure compliance with our banking covenants.”
SiriusXM’s announcement that it planned to merge its stock with Liberty SiriusXM Group, a tracking stock of Liberty Media, helped the SiriusXM share price climb 16.4% to $5.40 this week after it lagged for much of 2023. Friday’s high mark of $5.78 nearly brought the stock back to where it ended 2022, at $5.84 per share.
The deal, which requires regulatory approval and is expected to be completed in the third quarter of 2024, “will create value for all stockholders by eliminating the tracking stock structure, enhancing liquidity and allowing former LSXM stockholders to participate directly in the ongoing performance of SiriusXM,” said Greg Maffei, Liberty Media president/CEO, in a statement released Tuesday (Dec. 12).
Elsewhere, Live Nation climbed 9.2% to $93.00 this week thanks in part to an investor note by Morgan Stanley analysts that raised the price target to $110 from $100. Analysts pointed to a “secular shift” in consumer spending on experiences, the company’s increased disclosure about its Venue Nation business and a “highly unlikely” chance the Department of Justice will break up the company following its antitrust probe. Morgan Stanley’s $110 price target implies the stock, which is up 33.4% year to date, has 18% upside after Friday’s close.
Those big gains from SiriusXM and Live Nation, as well as a 4.1% gain from Universal Music Group, one of the index’s most valuable components, helped the Billboard Global Music Index increase 2.2% this week to a record 1,522.78. Nine of the index’s 20 stocks finished the week in positive territory, 10 stocks lost ground and one was unchanged.
Other indexes soared this week after the U.S. Federal Reserve held interest rates unchanged on Wednesday (Dec. 13) and indicated it would cut interest rates three times in 2024. The tech-heavy Nasdaq composite set a record closing price of 14,813.92 on Friday, marking a 2.8% gain for the week. The S&P 500 is still 2% away from its high mark after finishing the week up 2.5% to 4,719.19. In the United Kingdom, the FTSE 100 rose 0.3% to 7,576.36. South Korea’s KOSPI composite index gained 1.8% to 2,563.56.
The Billboard Global Music Index’s second-largest increase came from Reservoir Media, which gained 15% to $6.82. The stock’s $6.89 closing price on Thursday was its highest since $7.06 on Feb. 16 and is 31.4% above its 52-week low of $5.19 set on Aug. 10. Chinese music streamer Tencent Music Entertainment gained 8.0% to $8.88.
Hipgnosis Songs Fund gained 4.9% to 0.701 pounds ($0.89) after the company announced on Monday (Dec. 11) the sale of 20,000 non-core music assets for $23.1 million. The proceeds will be used to pay down its revolving credit facility. On Friday, the company also announced the appointment of Christopher Mills as an independent non-executive director effective immediately. Mills, who has a reputation as an activist investor, is CEO/investment manager of North Atlantic Smaller Companies Investment Trust and founded Harwood Capital Management in 2011. Following the news, Hipgnosis Songs Fund shares rose 2.3% on Friday.
Music streaming company Anghami dropped 30.4% to $0.94, bringing its three-week decline to 66.5%. Other than Anghami, however, no other stock finished the week with a loss greater than 5%. iHeartMedia fell 4.9% to $2.52 and MSG Entertainment dropped 3.2% to $31.16.
SiriusXM will merge its publicly traded stock with a Liberty Media tracking stock to create a single, streamlined public stock, the company announced Tuesday (Dec. 12). The deal — a piece of financial engineering rather than an overhaul of the companies’ organizations — will create a new public company that continues to use the SiriusXM brand.
SiriusXM and Liberty Media laid out numerous benefits of the transaction: a simplified equity structure; enhanced trading liquidity; a larger float (a larger percentage of outstanding shares on the market); the elimination of a multi-class stock structure; greater strategic flexibility; and greater potential for inclusion in stock indexes.
Investors have had two ways of investing in SiriusXM: the SiriusXM stock that trades on the Nasdaq and Liberty SiriusXM Group (LXSM), a “tracking stock” created by majority shareholder Liberty Media. (A tracking stock is a stock that depends on the financial performance of a specific business unit or division.) LXSM accounts for 84% of SiriusXM’s 3.84 billion outstanding shares; SiriusXM’s public shareholders own the remaining 16%.
On Sept. 26, with SiriusXM’s typically stable stock price down 26% year to date, Liberty Media announced a proposal to merge the two stocks. As detailed Tuesday, Liberty will separate Liberty SiriusXM Group by creating “SplitCo,” which will holds all LXSM assets and liabilities. SplitCo will immediately acquire SiriusXM in an all-stock transaction to form “New SiriusXM” with one class of common stock. New SiriusXM is expected to continue to be traded on the Nasdaq under the familiar stock ticker SIRI.
Former LXSM shareholders will get 8.4 shares in New SiriusXM for each share of LXSM and will own 81% of the post-merger company’s outstanding shares. Former SiriusXM shareholders will own the remaining 19%.
The new company will have a leverage ratio of 3.9 at close and a target leverage ratio of 3.0 (net debt to earnings before taxes, interest, depreciation and amortization). New SiriusXM has secured financing commitments up to $1.1 billion to fund the refinancing of a LXSM loan and an exchangeable bond. The companies told investors share buybacks will take less priority until that target leverage is reached.
“This combination will create value for all stockholders by eliminating the tracking stock structure, enhancing liquidity and allowing former LSXM stockholders to participate directly in the ongoing performance of SiriusXM,” said Greg Maffei, Liberty president/CEO, in a statement. “SiriusXM commands the largest paid share-of-ear in the car and has proven itself as an incredibly successful and profitable business. We are confident SiriusXM will continue to create value by building on its resilient business model to execute its strategic initiatives.”
“We are pleased that the Special Committee of our Board of Directors has reached this agreement with Liberty Media, which will allow SiriusXM to enter its next phase of value creation,” added Jennifer Witz, CEO of SiriusXM. “In a highly fragmented audio entertainment industry, SiriusXM has differentiated itself as the leading audio entertainment provider by creating an experience centered on our high-quality, premium, human curated radio that is more relevant than ever. In doing so, we have built a profitable business that is poised for continued success.”
The deal is expected to close in the third quarter of 2024 and is subject to regulatory approvals and a majority vote of Liberty SiriusXM Group shareholders. The transaction has been approved by Liberty Media’s board, a SiriusXM special committee and SiriusXM’s board of directors. The deal will be tax-free to Liberty SiriusXM Group and SiriusXM shareholders, except for cash received instead of fractional shares.
SiriusXM’s stock price has dramatically improved since September thanks to news of the merger plan as well as a 10% increase in its dividend in October. Shares of SiriusXM rose 5.6% to $5.30 following Tuesday’s announcement, reducing its year-to-date deficit to 9.2%.
If YG Entertainment’s re-signing of all four BLACKPINK members is any indication, investors can worry less about K-pop companies’ ability to retain their artists.
YG Entertainment gained 17.2% this week to 59,300 won ($45.00) as investors reacted to news that the four members of BLACKPINK signed to new, exclusive contracts with the agency. (The share price rose 29% the morning the announcement was made.) Uncertainty about contract renewals had caused the company’s share price to decline 16% in the week ended Sept. 22, as news reports out of South Korea said three BLACKPINK members would leave YG and spend just six months out of the year with the group. At the time, the company denied the news and insisted that the deals were still being discussed.
The BLACKPINK renewal appeared to have a positive impact on the stocks of other K-pop companies. Shares of HYBE gained 12.3% to 237,500 won ($180.24), while SM Entertainment shares rose 3.6% to 88,200 won ($66.94). Those improvements far exceeded the 0.5% gain posted by South Korea’s KOSPI composite index.
The Billboard Global Music Index gained 2.2% to a record 1,481.56, surpassing the previous high of 1,426.49 set four weeks earlier. That brought the index’s year-to-date gain to 26.9%. Half of the index’s 20 stocks finished the week in positive territory.
This week’s 2.2% gain outpaced major indexes around the world. In the United States, the Nasdaq improved 0.7% to 14,403.97 while the S&P 500 rose 0.2% to 4,604.37, reaching an all-time high of 4,609.23 on Friday (Dec. 8). In the United Kingdom, the FTSE 100 gained 0.3% to 7,554.47.
Spotify was the biggest contributor to the Billboard Global Music Index’s gain this week. The streaming company — the largest component of the 20-company, float-adjusted index — enjoyed a double-digit increase this week, gaining 9.6% to $198.05 after Monday’s news the company will lay off 17% of its workers. Following Thursday’s news that CFO Paul Vogel will leave the company in March 2024, Spotify shares rose 1.1% on Friday.
Another stock to react to financial news was Sphere Entertainment Co., which announced the sale of $225 million in convertible senior notes that mature in 2028. That sent the company’s shares down 15.5%, but the stock recovered most of its losses and finished the week down only 5.3% to $32.66. Following the debt announcement, Sphere Entertainment was upgraded by Seaport to a “buy” with a $38 price target, representing a 16.4% upside over Friday’s closing price. U2 concerts were doing $500,000 more per show than expected and the $99 average ticket price to the Darren Aronofsky film Postcard From Earth was above analysts’ $84 estimate.
The smallest stock on the index, Abu Dhabi-based music streamer Anghami, dropped 41.3% to $1.35 without any regulatory filings or other news. The stock was trading below $1.00 per share as recently as Nov. 15 but jumped to $3.49 on Nov. 21 on trading volume of 57.7 million shares, or about 50 times the daily average.
YG Entertainment has renewed its exclusive contract with all four members of BLACKPINK, the company announced Wednesday (Dec. 6), sending stock in the K-pop giant soaring on news that its most successful act would remain with the agency. At the market’s open, YG’s share price skyrocketed from 48,000 KRW ($36.57) — its lowest since January […]
Spotify shares jumped 7.5% on Monday (Dec. 4) following news the company will lay off 17% of its global workforce. CEO Daniel Ek called the layoffs a “crucial step” in a wider effort to be “relentlessly resourceful.” The layoffs amount to roughly 1,500 staffers based on the company’s recent disclosure of having 9,241 full-time employees. […]
Shares of iHeartMedia got a boost from the sale of its stake in BMI, rising 7.9% to $3.00 and making the radio giant the best-performing music stock of the week.
The company announced on Monday (Nov. 27) that it expected to receive approximately $100 million from the sale of BMI to New Mountain Capital. With a current market capitalization of just $423 million, the $100 million pre-tax windfall could provide a boost to a stock that has fallen 51.1% this year. iHeartMedia’s announcement said the company plans to use the proceeds for general corporate purposes, “which may include the repayment of debt.” At the 2023 Wells Fargo TMT Summit on Wednesday, CFO Rich Bressler told investors, “You should assume that we will reduce debt with it.”
The BMI sale follows iHeartMedia’s announcement in its third-quarter earnings that it has paid off $519 million of debt since the second quarter of 2022. In the third quarter, the company retired $89 million in principal balance for $65 million cash, according to its Q3 2023 investor presentation. Debt reductions to date are expected to save the company about $43 million in annual cash interest. Additional debt redemptions aided by the BMI sale will further reduce interest expenses and help its bottom line while the advertising market recovers. “I think we’re in terrific shape from the liquidity generation and free cash flow,” Bressler said on Wednesday, “and also in terrific shape to be able to take advantage of opportunities in the marketplace to improve the capital structure.”
The Billboard Global Music Index dropped 0.2% to 1,449.08 as nine of the 20 stocks finished the week in positive territory, 10 stocks posted losses and one was unchanged. Year to date, the index has gained 24.1%.
The week was notable for the unremarkable movements — either positive or negative — in most stock prices. In the absence of earnings results or major news releases, the biggest companies on the Billboard Global Music Index were confined to a narrow band of results. Warner Music Group shares rose 3.8% to $34.59, Universal Music Group gained 1.5% to 24.60 euros ($26.80), Spotify fell 0.5% to $180.75 and Live Nation dropped 3.9% to $84.23.
Anghami, the Abu Dhabi-based music streamer, had the index’s largest drop, diving 18.1% to $2.30. Still, the company’s share price is up 44.2% year to date and has gained 129% since receiving a notification, from the Nasdaq Stock Market in October, regarding its stock’s closing price falling under the $1.00 per share threshold for 30 consecutive days. Companies whose stocks fall below $1.00 for extended periods face being de-listed from the exchange.
While music stocks dropped slightly, some major indexes finished the week at new highs. On Friday, the S&P 500 rose 0.8% to 4,594.63, its highest mark of 2023 and its best showing since March 2022. The Dow Jones Industrial Average, a collection of 30 blue-chip companies, rose 2.4% to a new all-time high of 36,245.50. The Nasdaq composite gained 0.4% to 14,305.03 — nowhere close to its all-time record of 16,057.44 set in 2021 but close to its 2023 high of 14,446.55 set on July 19. In the United Kingdom, the FTSE 100 gained 0.5% to 7,529.35. South Korea’s KOSPI composite index grew 0.3% to 2,505.01.