SFX feels the effects of an allegedly unfair sale agreement

A securities class action lawsuit has been filed against an “end-to-end” electronic dance music “community” following allegations that the company misled investors with false statements in violation of federal securities laws.

The class action filing against SFX Entertainment Inc. was made in the U.S. District Court for the Southern District of New York on behalf of all investors who purchased shares in the company during the class period between Feb. 25, 2015 and Aug. 17, 2015. The complaint charges that SFX and some of its officers and directors breached federal securities laws by disregarding their fiduciary duties to NASDAQ:SFXE stockholders by agreeing to sell the company at a low cost and through an unfair process.

The plans for Sillerman to purchase SFX
SFX develops live events, media and entertainment content that focuses on the electronic music community. The company has a deep following among the millennial generation. It works to provide these consumers with live entertainment events, music discovery tools, content and channels through which they can connect with other fans of electronic dance music.

“The plaintiffs agreed to sell the company at a low cost and through an unfair process.”

On Feb. 25, 2015, SFX confirmed that it had negotiated with Robert F.X. Sillerman to come to allow him to acquire all of the outstanding shares in the company that he did not already own at a price of $4.75 per share in cash. Then, on May 26, 2015, SFX announced that it had signed a merger agreement stating that an affiliate of Sillerman would purchase all the outstanding common stock of the company that he did not own. Sillerman owns about 37.4 percent of the outstanding common stock of SFX. The agreement specifies that investors will receive $5.25 in cash for each share of SFX common stock they hold.

Class action filing claims company undervalued and sale unfair
The class action suit claims that the amount proposed to shareholders “is grossly inadequate and undervalues SFX.” At least one analyst had placed the high target price for SFX shares at $7 per share. Additionally, as recently as June 2014, stock prices were as high as $8.35 per share, and in December 2013 they hit $11.51 per share. The plaintiff also claims that the sales process is unfair for SFX shareholders because the defendants had agreed to preclusive deal protection devices including “a no-solicitation clause matching rights, and a $15 million termination fee provision, that prevent other competing offers.”

For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com