SFX Entertainment (SFXE) has had a terrible post-IPO performance.
The stock came public last month around $13 a share. It's now trading at less than $8.50 a share as of this morning.
It's not an Internet stock, so many people have ignored it. But it's worth a serious look going into its next batch of earnings.
It's a music entertainment company that offers concerts, music downloads, ticketing, artist management and sponsorship. But unlike Ticketmaster or LiveNation (LYV), SFX is purely focused on the electronic dance culture (EDC) market.
It's that focus which, at the moment, is likely scaring away investors. Most institutional investors are not likely followers of Calvin Harris or interested in spending three days camping out at the Tomorrowland festival.
But this is the focus that -- when earnings eventually start to deliver as I expect they will -- will propel the stock higher.
It's the focus on a segment that's the fastest-growing segment of the music industry, which will grab people's attention whether they attend Tomorrowland or not.
But we're not there yet.
SFXE's IPO prospectus shows that it's a company that's been cobbled together quickly through a series of acquisitions. That makes it much more difficult to track its organic growth or predict where it's going.
And the acquisitions have continued apace since the IPO as well.
So, we're likely only to see the true impact and growth of the company in real time once it reports those earnings in 2014.
What is clear is that SFX is the creation of CEO Bob Sillerman and many of his compadres that have been involved in selling three companies in the last decade for a combined $7 billion. He's the guy who was the mastermind of LiveNation itself.
Sillerman doesn't speak well anymore after contracting and then beating throat cancer 10 years ago. This might have turned off some investors during the IPO roadshow. They might have also wondered what a 65-year-old knows about raves and the music of a millennial generation.
But there's one thing he knows a lot about: how to make money. He's done it time and time again in his career and I'm betting he'll do it again here.
Electronic music may seem new here, but it's been around for more than 20 years in Europe. (Remember this music from "Trainspotting?") It's undergoing explosive growth right now and all the top pop songs these days are either electronic themselves or electronic-influenced.
You can either see this trend and profit from it or ignore it.
I've started accumulating SFX here and expect to grow the position going into their first earnings call as a public company in January.
