Date: May 2, 2013 Price: $12.50 Mkt. Cap.: $2.4 billion
An investment in Live Nation (LYV) provides investors with an opportunity to buy into a unique set of assets that provides an ecosystem to maximize that amount of revenue and profits available in the live entertainment industry. Unlike most of our typical investment reports which focus on free cash flow utilization, net asset value investing, mean reversion of margins or special situations, this report will look at the investment merits of a company that generates little free cash flow at the moment and is somewhat of a growth investment if company management is successful in achieving its objectives. Their dominant size is a competitive advantage and the presence of a significant, value creating long-term investor (Liberty Media) provides additional margin of safety from a liquidity standpoint. The strategy is not without risks and we will discuss those as well.. What follows is our analysis of the merits of Live Nation’s three year plan to grow its Adjusted Operating Income (AOI) by 30-35%.