U2 Knocks Live Nation Off Its Axis

Dec 18th, 2008 // Comment

The splashy 360 deals that Live Nation made with big-name artists like Jay-Z and Madonna, where in exchange for a cut of the musicians’ touring, recording, merch, and other revenues, the concert-promotion behemoth would pay out a lot of money, with some in stock, revealed their wobbliness in some SEC filings yesterday. U2, who signed a 12-year deal with the company in March, moved to sell the shares that it was paid, a tactic that could net them $25 million—and force Live Nation to pay some $18.9 million in order to make up for the nosedive its stock price has taken since those frothy, bubbly spring days when we all had hope, or at least enough delusions to not realize that the economy was pretty much being kept afloat thanks to a wide circulation of green-tinted Monopoly money.

But that faith was shaken Wednesday when the band moved to sell the shares, forcing Live Nation to make up an estimated $19 million in losses.,

Live Nation had guaranteed that U2 would receive $25 million for 1.6 million shares. But the current market value was just $6.1 million at the close of trading Wednesday. That leaves Live Nation on the hook for the balance, which the company said Wednesday in a SEC filing it would pay with cash on hand or borrowed money.

There could be more bad news coming from another of the company’s marquee acts: Madonna. In April, Madonna is eligible to sell $25 million of stock under the terms of her contract, even though the stock’s market value has plunged 83% since she struck her deal in October 2007.

Live Nation chief Michael Rapino waved off any concerns about the deals, saying that Madonna business was “great” and that “we look forward to monetizing our investment in U2 next year.” Uh, Mike? With the way things are going economy-wise, you may have to engage in some of that “monetization” by heading back to the band, hat in hand.

For U2, Live Nation Deal Rocks [WSJ]

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