It is a shame to
say that SFX Entertainment has filed for Chapter 11 bankruptcy. This is a
perfect example of a business plan’s financials gone wrong.
Robert Sillerman, Beatport owner and live music company
owner of SFX Entertainment, has filed for bankruptcy to wipe out $300 million
in debt off the companies balance sheet. In order to restructure the company it
intends on going private. SFX owns festivals such as Tomorrowland,
Tomorrowworld, Mysteryland and Electric Zoo. Robert F.X Sillerman states “we
have the opportunity to achieve all that SFX can and will be and look forward
to continue being the Chairman.” Although Sillerman will continue to be the
Chairman, the company is looking for a new CEO in order to lead the company to
recovery and continue its trend in the electronic music culture.
In January 25,
2016 SFX’s stock share fell 13.71 %. The
decision to file for bankruptcy is due to the company defaulting on an interest
payment of $3 million for a $10.9 million dollar loan. The company is in $490 million in debt and is
trying eliminate at least $300 million of its debt by filing the bankruptcy. Due
to unsecured debts that remained unpaid which were purchase price payment for
the acquisitions that built the company. According to Billboard,
the company owes $328,00 to PRO (performance rights organizations), $314,000 to
Facebook, $301,000 to Front Gate Ticketing, and $270,000 to event medical
service.
When planning a
business the most crucial part is its Financials. If you are borrowing money
from lenders and investors in order to start up your business, you better
believe and make sure your idea will make the money you project to make in the
upcoming years. It is important to take into consideration what can go wrong
where your incoming cash flow is more that what you’re spending. If the cash
flow doesn’t break even and making more than what your cost are then the
company can face challenges.
In my opinion, SFX
lost a lot of money due to TomorrowWorld festival in Georgia the second and
third year. This was due to weather related issues that cause major mudslides
and flooding it the third year of the festival. This caused SFX to give back
money to the upset festival attendees. There’s many reasons why it could have
lost money, but any company has to be prepared for the worst.
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