Breaking Down Saudi Arabia's $500 Million Investment In Live Nation

It's not as bad as it seems right now, but with the Crown Prince, we will see how it turns out in the future.
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News has been circulating over the past 24-48 hours about Saudi Arabia taking a 5.7% stake in Live Nation, buying about 12.5 million shares of the company. The total cost was around $500 million. It is quite worrisome to see a country led by a murderous and brutal dictatorship (no matter how hard they try and deny that with fancy lobbyists and PR companies, their true colors always show through) take a stake in the global leader in live music. 

Since the brutal murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul last October allegedly ordered by Saudi prince Mohammed bin Salman (US & Turkish intelligence officials confirm he did), the country has lost a lot of its reputation in countries not led by dictators. Music, specifically dance music, has largely had a non-exist relationship with Saudi Arabia, except for the odd and fake MDL Beast Festival last December, which boasted a lineup with the likes of Tiësto, Rick Ross, Black Coffee, David Guetta & Martin Garrix.

So with this new investment and cloud of murder seemingly hanging over the head of Live Nation, what does this mean for the company and its artists?

What Type Of Investment Was Made?

According to SEC filings, Saudi Arabia spent $500 million to buy 12.3 million in common stock for a 5.7% stake. This now makes them the third largest shareholder in Live Nation. Liberty Media (its own bag of problems, without killing people though) has a 33% stake.

The very important thing to note is that the Saudi Arabian Public Investment Fund bought these on the open market from other investors and brokers. They did not make a direct investment into Live Nation.

According to Billboard, the Saudi Arabian Public Investment Fund (PIF) manager H.E. Yasir Al-Rumayyan filed a Schedule 13G with the Securities and Exchange Commission, indicating that it would take a passive investment role in Live Nation.

Banks and funds must disclose any investment that takes a stake larger than 5% in a publicly traded company to regulators.

What Does This Mean For Live Nation?

They get more money. It is no secret that live music is FUBAR right now and Live Nation will need money to keep venues open, employees paid, contracts going, ticket refunds and much more. Since the Kingdom is a passive investor, Live Nation doesn’t have to answer to the Crown Prince like it does to John Malone and Greg Maffei at Liberty Media. This has boosted the Live Nation stock and may be a bridge to when live music comes back.

However, Saudi Arabia does have a way in and if they do amend their 13G filing, then things could get interesting. Amending isn't difficult, but whether or not they want to or have the knowledge to even become an active investor in Live Nation would be dubious. PIF has investments in Uber, Carnival Cruises, Tesla and a lot more, either directly or through other funds.

Moving Forward?

Now the question is what will this mean moving forward? Probably nothing. Saudi Arabia wants to diversify it investment portfolio away from oil. It has been seeking investors in the country, to middling success of late and wants to invest in more companies abroad with its massive investment fund. It has been trying to IPO Saudi Aramco in small bites, but that hasn’t gone as well as it would have wanted or as investors would like.

However, things could change. The Saudi rulers have shown the proclivity to cut apart people who don’t think highly of them, so the rule of law doesn’t always apply to the ruling family. It would likely be bad business to go after Live Nation, but vindictive, murderous princes who think they are invincible don’t always make the right business decisions.

If they do amend their current status as a passive investor, we would at least know about it.

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