Endeavor Postpones Its IPO

Co-CEO of William Morris Endeavor Ari Emanuel -Getty-H 2019
Neilson Barnard/Getty Images

Endeavor, led by CEO Ari Emanuel, had a heavily leveraged strategy which led to an IPO plan that was scrapped last September. 

Endeavor was supposed to have priced its IPO, possibly within hours, at about $27 per share, after saying last week it would be as high as $32.

In a sign that Wall Street's appetite for investing in talent agencies and even diversified media holdings may be lower than some expected, Endeavor Group has postponed its initial public offering.

"Endeavor will continue to evaluate the timing for the proposed offering as market conditions develop," the company stated Thursday. 

Endeavor was expected to have announced a share price for its IPO, possibly within hours, of about $27, after saying last week it would be as high as $32. But in the end, the IPO was shelved — at least temporarily. 

The reduced per-share price, coupled with a lower-than-expected number of shares that would be made available, would have meant the parent of talent agency WME and the Ultimate Fighting Championship could raise about $360 million from the IPO when it had previously forecast raising up to $600 million.

Endeavor’s stock was set to have begun trading as early as Friday on the New York Stock Exchange under the symbol "EDR," with an initial market capitalization short of the previous estimates, which were north of $8 billion.

The tabling of the IPO is likely a huge disappointment for top executives and many of the other 7,000 employees who were expected to benefit to the tune of a combined $1 billion in equity bonuses. The IPO would have also been a huge victory considering the timing, as WME — along with the other major Hollywood talent agencies — is still engaged in a high-profile legal battle with writers, many of whom severed ties with their agents.

The agencies' battle with the WGA involves packaging fees, which agencies collect for attaching talent to a TV project, a practice writers argue boosts agency profits at their expense. Some Wall Street observers privately opined that Endeavor had been forging ahead with its IPO despite less-than-bullish sentiment in part to prove that WME’s business is not dependent on packaging fees and hasn’t been harmed much by the defection of most of its writing clients.

Many observers predicted that the feud would need to be settled prior to any IPO, and in fact, the WGA had taken direct aim at Endeavor’s IPO, on one occasion telling the SEC that WME inflated its number of clients and on another occasion stating that it was “impossible to reconcile the fundamental purpose of an agency — to serve the best interests of its clients — with the business of maximizing returns for Wall Street."

People familiar with the matter said Thursday that the issue between WME and the WGA had nothing to do with shelving the IPO, and attributed it instead to general bearishness for IPOs on Wall Street of late.

Endeavor has also been contending with five unresolved lawsuits filed by a group of UFC fighters years that makes antitrust claims and accuses the firm of shortchanging them. Some fighters also are trying to unionize, an effort the UFC is vigorously resisting.

In an SEC filing, Endeavor acknowledged that, between lawsuits filed by the WGA and UFC fighters, plaintiffs may seek recovery of “very large or indeterminate amounts” of money and the outcome “may remain unknown for substantial periods of time.”

The IPO would have been significant in another way, as it would have required WME to disclose financial details that historically tight-lipped agencies have in the past kept secret. Plus, Endeavor’s IPO could have encouraged other majors, like CAA and United Talent Agency, to someday follow suit, though those companies aren’t yet as diversified as Endeavor, whose assets also include Professional Bull Riders, the Frieze Art Fair, streaming delivery company NeuLion and the 160over90 marketing agency.

In Endeavor’s pre-IPO filing, it reported $2.05 billion in revenue for the first six months of 2019 with operating income of $10.3 million and a net loss of $223 million. Ari Emanuel and Patrick Whitesell, the co-CEOs, along with CFO Jason Lublin, Endeavor president Mark Shapiro, chief marketing officer Bozoma Saint John and human resources topper Kerry Chandler are likely out millions of dollars each, for the time being, as is Silver Lake Partners, which became the first private equity firm to buy into Endeavor in 2012 and has amassed a significant, though still minority, stake since then.

In a pre-IPO roadshow video, Lublin says: “We’re going public to be more nimble and responsive for our clients and ... to give us capital and currency for M&A, which has and will continue to be central to our strategy.”

In the same video, Emanuel adds “I don’t believe there’s another platform like ours. I have competition in the advertising business, talent agency business and sports business, but they’re all individual companies. ... I’m way out in front of you by miles and miles.”

Apparently, Wall Street wasn't buying what the executives were selling, at least not to the degree they'd hoped. Yanking the IPO is a sign bankers, executives and all else involved were not confident the stock would have been well received and likely would have traded below even the recently lowered expectations.

The Writers Guild of America West issued the following statement: "Reports that the Endeavor IPO has been withdrawn show that investors didn’t buy the company’s conflicted business practices."

Sept. 26, 4:13 p.m. Updated with statement from the WGA.