SFX Entertainment (SFXE) Shorts Likely to Get Squeezed, Says Albert Fried & Company

Albert Fried & Company maintained an Overweight rating on SFX Entertainment (NASDAQ: SFXE) and raised its price target to $6.00 (from $5.00). On Friday SFX Entertainment said it received an indication of interest at a price lower than the $5.25 per share offered by Sillerman in the merger agreement signed on May 26, 2015. Today the company said Sillerman reaffirmed his intention to provide a revised offer.

Analyst Rich Tullo said as the new process unfolds short sellers will likely get squeezed.

"We analyzed three recent on the run M&A transactions; C3, Bonnaroo, and Tribeca Film to value SFXE (we excluded the $1.5 billion TPG Cirque de Soleil Deal) on a per attendee basis. The headline prices for these transactions in some cases are large -$125 million for C3. We price these deals on actual Company SEC disclosures and not PR driven media headlines. We assume that the headline prices include debt and reflect maximum value to earn out payments or hypothetical to “PUT” values, depending on deal structure. On the more tangible cash basis paid to acquire an initial control stake basis, we think SFXE’s assets at the $135 million market cap represents about a 75% discount to intrinsic value," said Tullo.

"In our view, SFXE has risks. Suboptimal execution has been compounded by potential acquires being aloof and a management team that have zero incentive to maximize public shareholder value. We think all the buyers are trying to buy SFXE at a optimal discount thus SFXE and any buyers have no incentive to publically highlight SFXE’s potential. In our view, SFXE in the right hands is worth significantly more than Sillerman’s broken bid and given SFXE has a high short interest we think there is significant but risky upside in the shares," continued the analyst.

"On Friday Management confirmed to us that SFXE did receive an outside bid for the Company in addition to a revised Sillerman bid. We think as the new process unfolds short sellers (23.7% of float) will likely get squeezed in SFXE shares," added Tullo.

For an analyst ratings summary and ratings history on SFX Entertainment click here. For more ratings news on SFX Entertainment click here.

Shares of SFX Entertainment closed at $1.39 yesterday.

You May Also Be Interested In

• LuxUrban Hotels Inc. (LUXH) PT Lowered to $4 at Jones Trading
• Accenture Federal Services (ACN) to Acquire Cognosante
• TransDigm (TDG) PT Raised to $1,200 at Stifel