October 13, 2021 - 11:43am EST by
2021 2022
Price: 10.00 EPS 0 0
Shares Out. (in M): 195 P/E 0 0
Market Cap (in $M): 1,951 P/FCF 25 11
Net Debt (in $M): 0 EBIT 75 175
TEV (in $M): 1,951 TEV/EBIT 26 11

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HZAC is a SPAC that is in the process of merging with Vivid Seats, with the shareholder vote scheduled for October 14 to approve the business combination. Vivid Seats announced its agreement to merge with HZAC in April 2021, and the deal priced off of financial forecasts prepared in early Q1 2021. The transaction priced at a reasonable 18.7x 2022E EBITDA on those original forecasts. But since March 2021, the live events industry has seen a dramatic rebound and Vivid Seats has been materially outperforming its forecasts, while the SPAC stock price is still hovering around $10. Vivid Seats has not revised their financial guidance, as doing so would cause them to have to restate filings with the SEC, and since the deal terms are already signed, there is no benefit to the company to updating guidance prior to closing. However, once the SPAC merger is approved and the transaction closes (expected October 18), Vivid Seats will likely provide revised 2021 and possibly 2022 guidance on their subsquent earnings call, which I expect to be materially above the original forecast. If the stock trades at the deal multiple (18.7x) on the EBITDA I expect in 2022E, the stock should be up 60%+ over the next 2-3 months.

Business Overview:
Vivid Seats is the #2 secondary ticketing marketplace in the US (behind StubHub) with ~$2.3B of gross order value (GOV) in 2019. Vivid Seats has a high quality, network effect driven business model where it connects ~3,400 ticket sellers with ~5m annual consumers that want to buy tickets to concerts (46% of GOV), sporting events (42% of GOV) and theatrical shows (12% of GOV). It’s a high quality marketplace model where more buyers on the platform causes sellers to want to list their inventory on the platform, which brings in more buyers, etc. Vivid Seats generates an 18% take rate (revenue as % of GOV) for facilitating these transactions, which is in line with other marketplaces connecting fragmented supplier and buyer bases (and is notably below the 23% that StubHub last reported in 2019 when part of eBay, reflecting some potential upside over time). Vivid Seats has high gross margins and therefore can invest a significant amount (~40% of revenue) to attract buyers to their site/app, while still generating a 25% EBITDA margin in 2019.

The secondary ticketing market in the US was ~$11B in 2019. StubHub is the largest player with ~40-45% market share, while Vivid Seats has ~20-25%, Ticketmaster has ~15-20%, and SeatGeek and others round out the market. The secondary ticketing industry has grown at a 9% CAGR from 2014-2019, driven by an increasing preference by consumers for experiences over goods, an increasing supply of live music events as artists earn less money from album sales, and the increasing ease of purchasing secondary tickets (driven by platforms like Vivid Seats). While the live events industry came to a halt in 2020 due to COVID, the market now appears to be recovering nicely and should fully recover in 2022.

While market share gains are not required for my thesis to play out, I do believe Vivid Seats is well positioned to take share going forward. Importantly, Vivid Seats owns Skybox, the leading ERP software that ticket brokers use to manage their inventory, distribute tickets across the various marketplaces and update available inventory in real-time, and dynamically manage pricing, among other functions. Vivid Seats gives away Skybox for free, which has led to approximately 50% market share. This huge source of data allows Vivid Seats to have unique insights into the available inventory in the market, which informs its customer acquisition strategies (SEM/SEO), and also can ensure that prices sellers show on the Vivid Seats marketplace are equal to or better than prices on other marketplaces, creating a better buyer experience. This competitive advantage has historically allowed Vivid Seats to outgrow the market, and I believe that should continue. For example, Vivid Seats’ Q2 2021 run-rate GOV is ~20% above 2019 GOV levels; Ticketmaster (on LiveNation’s Q2 earnings call) announced that their June 2021 secondary ticketing GMV was “only” 8% below 2019 levels, implying Vivid Seats likely took a meaningful amount of share from Ticketmaster. (Note: StubHub is now private, and Ticketmaster and SeakGeek don't disclose secondary ticketing volumes, so we don’t have perfect information on market share).

Lastly, given broad market skepticism for SPAC deals (which is really the source of the opportunity here) it is worth highlighting that Vivid Seats is a high quality, real business, having been owned by PE firm GTCR for the past 4 years (and Vista prior to that). Putting COVID aside, the business is stable and was run with ~7x leverage (which will be entirely paid down as part of the SPAC transaction). Again, this is a business that grows 10% in a normalized environment (faster during COVID recovery) with 25%+ EBITDA margins, and FCF in excess of EBITDA due to negative working capital. The business quality is in stark contrast to many of the lower quality, unproven businesses that have recently come public through SPACs.

Situation & Catalyst Path:
As mentioned above, Vivid Seats announced the SPAC transaction in April 2021. In their September 2021 Analyst Day presentation, on page 40, they note that the projections were “prepared during early Q1 2021” which in my view highlights that those forecasts are now out-of-date and conservative. Below is a Google Trends chart for “Vivid Seats” and “tickets”, which shows that after ~12 months of hovering near zero, search interest rebounded fairly sharply and steadily from March through October 2021. The financial forecast for the SPAC deal was basically set at the trough of ticketing demand.


Notably, Vivid Seats was originally forecasting $781M of GOV in 2021 and $2.4B in 2022. However, in Q2 2021, given the rebound in demand as the world started going out again, Vivid Seats reported $693M of GOV, or ~$2.8B annualized – already in excess of their 2022 forecast. The company also reported $36M of Adj. EBITDA in Q2, or $144M annualized, vs. an original 2021 and 2022 forecast of $7M and $110M, respectively. And, the live events industry is ready to explode given pent up demand. Artists have been unable to tour for 15-18 months and are itching to put on more shows; in August 2021, LiveNation CEO said: “Looking forward to 2022 and now 2023, all our leading indicators continue to point to a roaring era for concerts and other live events. Starting with our concerts division, every major venue type, arenas, amphitheaters and stadiums, have pipeline indicating double-digit growth in our show count and ticket sales relative to 2019 levels. In some cases, our pipeline is so strong, we are extending our planning into 2023 and even beginning to discuss tours that extend into 2024.” The 2022 slate of events has largely not been released and should start hitting Vivid Seats’ numbers in Q4 2021.

In light of the rapid recovery and significant events pipeline, I expect Vivid Seats can generate $3B of GOV and $180M Adj. EBITDA in 2022E, vs. the original forecast of $2.4B and $110M, respectively. Additionally, Vivid Seats has generated an additional $100M+ of cash since the transaction announced (in part due to the recovery), which brings the EV down from $2.06B to $1.95B. So while the original transaction priced at 18.7x 2022E EBITDA, I believe the company is now valued at 11x 2022E EBITDA and 10x 2022E FCF. High quality, growing marketplace comps trade at 30x+ EBITDA. But even applying the more conservative deal multiple of 18.7x 2022E EBITDA implies a $16.10 stock price.

The shareholder vote to approve the SPAC merger is scheduled for October 14 and the transaction should close on October 18. The company will likely report Q3 2021 results in November, at which point I would expect them to revise their original forecast materially higher, which should drive the stock to my target price.

So why does this opportunity exist? De-SPACs have been a minefield of late, so many investors have stopped spending time on those companies. And there has been a ton of new issuance of both SPACs and IPOs, particularly in the broader technology sector, and so there isn’t a ton of analyst bandwidth to look at a new small cap company coming to market. Vivid Seats is a very high quality business with an amazing near-term catalyst path that has simply slipped through the cracks.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


  • SPAC transaction close in mid-October (expected October 18)
  • Likely positive forecast revision on the Q3 2021 earnings call
  • Very strong 2022 live events slate driving further upside to forecasts
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