Coronavirus is killing Live Nation Entertainment Inc. (NYSE: LYV). For instance, Live Nation admits its ticket sales fell by 96% between 2nd Quarter 2019 and 2nd Quarter 2020.
“A total of 10.7 million tickets were refunded in the quarter, amounting to just slightly over $1.1 billion of gross transaction value,” in 2nd Quarter 2020, Live Nation admits in an SEC filing. Moreover, MusicBussinessWorldwide estimates Live Nation’s year-to-year concert revenues fell by 95% between second quarter 2019 and 2nd Quarter 2020.
Finally, Live Nation admits its overall revenues fell by 98% between 2nd Quarter 2019 and 2nd Quarter 2020. In detail, Live Nation lost -$87 million on ticketing in 2nd Quarter 2020. In contrast, Live Nation made $370.8 million from ticketing in 2nd Quarter 2019.
Live Nation Reports $419.30 million Operating Loss
Consequently, Live Nation (NYSE: LYV) reported a -$431.90 million operating loss in 2nd Quarter 2020. Conversely, Live Nation reported an operating income of $319.3 million operating income in 2nd Quarter 2019.
“We estimate the lost revenue impact from the global COVID-19 pandemic in the second quarter and first six months of 2020 to be approximately $2.9 billion and $3.3 billion, respectively,” Live Nation admitted in its 2nd Quarter 2020 shareholder letter.
Furthermore, Live Nation reported an operating loss of -$172.67 million on 31 March 2020. In contrast, Stockrow reported an operating loss of -$82.92 million on 31 December 2019.
Live Nation is Losing Money
The financial data shows Live Nation cannot make money in today’s market. For example, Live Nation’s quarterly gross profit fell from $701.71 million on 31 December 2019 to $491.87 million on 31 March 2020.
In contrast, Live Nation common net loss grew from -$122.85 million on 31 December 2019 to -$184.78 million on 31 March 2020. Plus, Live Nation reported a -$610.58 million operating loss and on 30 June 2020. That operating loss grew from -$210.92 million on 31 March 2020, and -$136.64 million on 31 December 2019.
Consequently, Stockrow estimates Live Nation’s net profit margin for 1st Quarter 2020 at 13.53%.
Live Nation Burns Cash
Live Nation (NYSE: LYV) is burning cash. Live Nation reported a quarterly “operating cash flow” of -$1.022 billion on 30 June 2020.
In contrast, Live Nation reported an operating cash flow of $631.67 million on 31 March 2020. As a result, Live Nation was forced to borrow money to sustain its operations.
To explain, Live Nation reported a quarterly financing cash flow of $1.08 billion on 30 June 2020. However Live Nation reported quarterly financing cash flows of $382.4 million on 31 March 2020 and $468.50 million on 31 December 2019.
Thus, I think Live Nation borrowed money to sustain its operations for three quarters in a row. Dramatically, Live Nation’s quarterly ending cash flow fell from $3.281 billion on 31 March 2020 to $18.65 million on 30 June 2020. Thus, Live Nation’s business is generating almost no cash and burning cash.
Live Nation can survive
I think Live Nation will survive for some time because it has cash. For example, Live Nation reported cash and short-term investments of $3.3 billion on 30 June 2020.
That cash and short-term investments fell from $3.282 billion on 31 March 2020. Moreover, Live Nation reported Live Nation had $11.622 billion in total assets on 30 June 2020. Thus, Live Nation has assets it could borrow against for some time.
Ultimately, Live Nation’s cash and its ability to borrow money will run out at some point if the concert business fails to restart. If the concert business fails to restart, Live Nation (LYV) will declare bankruptcy.
Live Nation Shows Mr. Market is in Denial about Coronavirus
I think Live Nation’s share price demonstrates that Mr. Market and investors are in denial about the reality of coronavirus.
To explain, I think Live Nation has no means of generating revenue yet Mr. Market paid $51.35 for its share on 12 August 2020. Moreover, Live Nation’s share price rose from $42.62 on 26 June 2020. Even though there is no evidence that the concert business will restart anytime soon.
In comparison, Live Nation started 2020 with a $71.89 share price on 2 January 2020. Hence, Live Nation retains most of its value even though coronavirus has killed its business.
Thus investors are buying a worthless stock because of wishful thinking that the pandemic will end soon. However, many scientists think the pandemic will last for up to a year and a half.
Live Nation Cannot Avoid Bankruptcy
For example, Ezekiel (Zeke) Emanuel thinks America will not be able resume normal business until November 2021. To elaborate, Knowledge at Penn reports Emanuel thinks November 2021 is the earliest date at which we could contain coronavirus.
If Emanuel is right, Live Nation may not be able to hold concerts again until November 2021. Emanuel is vice provost for global initiatives and chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania and Wharton professor of health care management.
Under those circumstances, I cannot see how Live Nation (NYSE: LYV) can survive as a standalone company. Instead, I think Live Nation’s only hope for survival is to sell itself to a deep pocketed savior such as a hedge fund. However, I cannot imagine any hedge fund manager with a brain touching Live Nation until the pandemic ends.
The bottom line is investors need to avoid Live Nation until after the coronavirus pandemic ends. I think this stock will have no value for the foreseeable future.
Originally published at https://marketmadhouse.com on August 12, 2020.