Ticketing business SeatGeek has signed a definitive agreement to go public with Gerry Cardinale’s RedBall SPAC in a deal valuing the enterprise at $1.35 billion, according to a Wednesday morning press release.
“It really gives us the opportunity to double-down on what we’ve already been doing,” SeatGeek CEO Jack Groetzinger said in a phone call. “To continue to grow our brand, to continue to sign new enterprise deals, to continue to expand marketing, but also to invest in new products and technology and find a way to make the industry better for all stakeholders.”
Joining the transaction are Utah Jazz owner Ryan Smith and Kevin Durant’s Thirty Five Ventures, which are part of a PIPE syndicate buying $100 million of shares and warrants. The PIPE group also includes Accel Partners, an existing investor in SeatGeek, as well as other investors not yet disclosed. RedBall will be bringing all $575 million it raised at its IPO to the transaction. After paying expenses and accounting for existing cash on its books, SeatGeek will have $669 million to finance activities after the merger closes in early 2022.
As part of the deal, the company will pay down $62 million in debt, while RedBall’s sponsors, led by Cardinale, will take a ‘promote’ of about 7.2 million shares, half of which is deferred and exerciseable at $12.50 and $15 a share, according to an investor presentation. The promote are large amounts of cheap warrants to buy stock which SPAC sponsors award themselves at their IPO, at a level that is frequently negotiated down with target companies. Overall, existing SeatGeek shareholders will own 63.5% of the new business at closing, RedBall shareholders 28.5%, RedBall’s sponsors 3.1% and PIPE investors 5%, according to the document.
SeatGeek started in 2009 as a secondary ticket marketplace and has since been adding direct relationships with teams and venues, including the Brooklyn Nets and Barclays Center, to provide ticket-swapping and event-day offerings. SeatGeek’s venture capital investors include Causeway Media Partners, co-founded by Boston Celtics owner Wyc Grousbeck; Melo7 Tech Partners, co-founded by Carmelo Anthony; and Elysian Park Ventures, founded by the owners of the Los Angeles Dodgers. Individual investors include rapper Nas and former NFL quarterbacks Peyton and Eli Manning. SeatGeek has posted 70% compound annual growth between 2016 and 2019, according to the release. In 2019, the business had revenue of $142 million and a net loss of $46 million. Sales fell to $33 million last year and losses widened to $92 million due to the pandemic. SeatGeek told investors it expects sales to be $132 million this year and $1.2 billion in 2025. Growth is expected to come from new product introductions and on further enterprise deals with events rightsholders.
“We’re deeply vertically integrated. We’re not just running a consumer marketplace,” said Groetzinger on the phone call. “We’re also building software for teams and venues that the Cavs and Cowboys, the Saints, the Pelicans, the Nets and many other teams use to power their business. And it’s really this one-plus-one-equals-three between the two. That is the magic of our business.”
News of the merger broke Friday, as RedBall warrants surged 60% on more than 1,000 times their normal volume. After the parties announced today they have a definite merger agreement, warrants dropped as much as 13%, to $1.02 Wednesday. SPAC warrants are typically how traders play merger news. RedBall shares are little changed, at $9.88. RedBall warrants had traded as high as $2.634 in January, on reported discussions to bring Fenway Sports Group public. RedBall shareholders will need to approve the merger at a future vote for the transaction to close.
“I’m proud to become a part of the SeatGeek story at this key moment,” said Jazz owner Smith in the release. “As a team owner, I know how much opportunity there is to modernize the business around sports. With their incredible team and world-class technology, SeatGeek is poised to make a huge impact on our industry.”
(The story has been updated throughout with pricing information, merger details and quotes from SeatGeek CEO Jack Groetzinger.)