Yesterday Eventbrite announced it was purchasing long-time rival Ticketfly for $200M as part of an up-against-the-clock transaction between Pandora and SiriusXM. After encircling each other for the past two years (and burning through $1.5 billion in market cap in the process), Sirius agreed to make a $480 million investment in the streaming giant for a 19% stake and three seats on the board of directors including the chairman’s post.
Eventbrite’s purchase of Ticketfly was the secondary story, reduced to a punchline by many media sites for the enormous write-down Pandora was taking just 20 months after buying Ticketfly.
Desperate times = desperate measures: Pandora takes $250 million loss on ticketing companyhttps://t.co/Fdhmg2D1gh
— Mashable (@mashable) June 9, 2017
Pandora Sells Ticketfly To Eventbrite For $200M, A $250M Loss https://t.co/GnHCwZThhF
— hypebot (@hypebot) June 9, 2017
…aaand Pandora dumps Ticketfly for $200m to Eventbrite. Paid $450m for it a year and a half ago.
— Ben Sisario (@sisario) June 9, 2017
Pandora taking a $250 million loss on Ticketfly just 20 months after buying it would be a huge story — if it were true. Here’s the thing: Pandora did not pay $450 million for Ticketfly in 2015. It paid $335 million.
This fact would have been lost on me if a Ticketfly spokesperson hadn’t sent me an email in May correcting my use of the $450m number for a story I was writing pre-Eventbrite sale.
“The $450m number was the approximate transaction value at the time we announced the acquisition,” the email titled “$450 number” read. “Pandora ended up paying $335m+ upon close in November 2015. It’s all in this SEC filing.”
Wait, so how did the price go from $450 million in October 2015 to $335 million one month later?
The answer – because Pandora’s stock dropped 40% in value just weeks after the Ticketfly deal was announced on Oct. 7.
According to the SEC filing, Pandora paid $191 million in cash for Ticketfly and $136 million in stock (as well as some cash and stock options to certain note-holders). In total 11.2 million shares were paid out to Ticketfly at $12.18 per share.
If the stock was still trading at $21.50 per share (where it had been prior to the Ticketfly announcement), the common stock contribution would have been worth $240.1 million, but the sudden and swift drop wiped out $100 million in value.
Why did it drop? Not because of Ticketfly — the stock dipped because of the market’s reaction to the company’s third-quarter earnings report. Not only was Pandora seeing a slight dip in users as competition with services like Apple Music started to heat up, but in that same period Pandora settled a lawsuit with several record companies over pre-1972 recordings for $90 million. That caused the company to adjust its 2015 guidance and EBITDA projections, and wham, the stock plunged overnight.
Bottomline, the drop in stock price cut about $115 million in value out of the Ticketfly deal and ultimately brought the price tag down to $335 million.
So next time someone says “Pandora just lost $250 million on the Ticketfly sale” you have two options: you can say, “well actually, they only paid $325 million for the company and only $190 million was in cash, the rest was their stock which a lot of the Ticketfly investors and employees still retain” or you can just shake your head and say “that’s crazy bro.”
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