Live Nation Entertainment: Analyzing the Cost of Capital under Regulatory Risk

Kewen Fan

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.ACCOUNTING

Faculty Research Mentor: Andreas Kakolyris

Abstract:

Live Nation Entertainment, Inc. (LYV) is one of the largest international live entertainment companies. Since merging with Ticketmaster in 2010, it has grown to dominate the live events market. Despite its market position, the company has been charged by the U.S. Justice Department and multiple states with monopolistic practices. This research aims to analyze how the current regulatory risk influences the firm’s cost of capital and optimal capital structure. Using data from Bloomberg Terminal, this research applies the Hamada equation to examine how changes in leverage affect its levered beta. Then, it uses the synthetic rating method to estimate interest coverage ratios, further simulating the weighted average cost of capital (WACC) under various debt-to-equity levels. These findings are anticipated to reveal how regulatory pressure potentially increases the risk profile, raising the cost of capital and possibly shifting the optimal capital structure. These results may provide insights on how firms can respond to legal pressure in similar situations.