Shares of Ticketmaster parent Live Nation Entertainment (LYV 0.56%) closed up 9% on Thursday after the company reached an agreement in principle with the Justice Department over its ticketing practices. The ongoing investigation was hanging over the stock, and investors were relieved to see the company putting it in the rearview mirror.
Live Nation and Ticketmaster merged in 2010, and the companies at the time agreed to follow court-imposed conditions designed to preserve and promote ticket competition. The DOJ had reportedly been investigating the company for allegedly pressuring concert venues to do business with Ticketmaster, but Assistant Attorney General Makan Delrahim said in a statement on Thursday that the government believes the revised agreement announced Thursday will prevent any future damages.
"Today's enforcement action including the addition of language on retaliation and conditioning will ensure that American consumers get the benefit of the bargain that the United States and Live Nation agreed to in 2010," Delrahim said. "Merging parties will be held to their promises and the Department will not tolerate transgressions that hurt the American consumer."
The agreement includes provisions designed to ensure that Live Nation doesn't threaten to withhold concerts from venues that don't use Ticketmaster, and language that states clearly that a threat by Live Nation to withhold concerts would be a violation. Live Nation is subject to a penalty of $1 million for each violation.
The agreement was also extended by 5 1/2 years.
Shares of Live Nation had outperformed the S&P 500 for the year even before this settlement. After Thursday's jump, they're now up 41% in 2019. While the agreement puts more scrutiny on the business to behave and not cut corners, the deal also removes a major overhang surrounding the stock.
Even after the agreement, Live Nation is a dominant force in its industry and well-positioned to benefit from continued consumer demand for live entertainment.