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Another law firm investigating allegations over Sillerman’s aborted SFX buy-back plan

By | Published on Tuesday 22 September 2015


An LA legal firm says it is investigating whether SFX violated federal securities law when the EDM powerhouse’s founder Robert FX Sillerman aborted plans to take the company back into private ownership. This follows the news that a New York-based legal firm is plotting a class action lawsuit against the company based on similar allegations.

Glancy Prongay & Murray LLP says it is looking into claims made against SFX on behalf of some of the EDM company’s investors. It is assessing allegations that “the company made materially false and misleading statements in connection with the proposed acquisition of SFX by Robert FX Sillerman, SFX’s CEO and largest shareholder, for all of the outstanding common stock he did not already own”.

As previously reported, last month Sillerman admitted that he couldn’t raise the finance to buy back all the SFX shares he doesn’t currently control, the firm’s slumping share price having made his original offer to other investors somewhat unrealistic.

Carefully adding in the word “allegedly” several times while announcing its investigation, the law firm says it will consider claims that “Sillerman failed to disclose that he allegedly did not have any financing in place at the time he made his proposal and knew, or recklessly disregarded, that he could not obtain the financing to complete the transaction”.

“Mr Sillerman’s proposal was allegedly a sham offer to increase the value of the company’s shares, in the fact of the company’s increasing debt and decreasing margins”, it goes on. “Following the news that Mr Sillerman would no longer consider purchasing the company, shares of SFX have declined sharply in value”.

If any of these allegations were true, investors who bought into the festival promoter and Beatport owner after Sillerman’s buy-back plans were announced would likely have the strongest case against the firm and its founder. Whether any serious investors will take full-on legal action remains to be seen.

Meanwhile, as previously reported, SFX has secured $90 million in new financing, which it hopes will provide short term security while the company’s board considers future options re ownership, including an anticipated new proposal from Sillerman himself.