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Endeavor was supposed to have set the price of its IPO, probably in a matter of hours, at about $ 27 a share, after announcing that last week it would be as high as $ 32.
Saying that Wall Street's appetite to invest in talent agencies, or even diversified media, may be below expectations, Endeavor Group has postponed its IPO.
"Endeavor will continue to evaluate the timing of the proposed offer according to changing market conditions," the company said Thursday.
Endeavor was to have announced a price of about 27 USD for its IPO, probably within hours, after announcing that the price would reach 32 USD last week. But in the end, the IPO was suspended – at least temporarily.
The reduced share price, coupled with fewer shares than expected, would have meant that the parent company of the WME talent agency and the Ultimate Fighting Championship could collect around $ 360 million from the IPO, while it's forecast to raise up to $ 600 million.
Endeavor's shares were expected to begin trading on the New York Stock Exchange on Friday, under the symbol "EDR", with an initial market capitalization lower than previous estimates, which were north of $ 8 billion.
The filing of the IPO is likely a huge disappointment for senior executives and many of the other 7,000 employees expected to benefit from a combined $ 1 billion equity bonus. The IPO would also have been a huge win considering the timing, as WME – along with other major Hollywood talent agencies – is still engaged in a high-level legal battle with writers, many of whom have broken ties with their agents.
The battle of the agencies against the WGA involves packaging fees, which they perceive to tie talents to a television project, according to an editor, which increases the profits of the agencies at their expense. Some Wall Street observers have privately stated that Endeavor was continuing its IPO despite the somewhat optimistic feeling in part of proving that WME's business does not depend on the cost of packaging and n & # 39; He had not suffered much from the defection of most of his writings. customers.
Many observers have predicted that the quarrel should be settled before any IPO. In fact, the WGA had directly targeted the purpose of Endeavor's IPO, telling the SEC that WME had inflated its number of customers and on another occasion was "impossible to reconcile the the fundamental goal of an agency – to serve the best interests of its clients – with the goal of maximizing returns for Wall Street. "It is hard to say whether these efforts have been successful.
Endeavor has also been battling five unresolved lawsuits filed by a group of UFC fighters in recent years, who are making antitrust claims and accusing the firm of dismissing them. Some fighters are also trying to unionize, an effort the UFC vigorously opposes.
In a document filed with the SEC, Endeavor acknowledged that between lawsuits filed by the WGA and UFC combatants, plaintiffs could seek recovery of "very large or indeterminate sums" and that "Issue" could remain unknown for long periods ".
The IPO would have been important in another way, as it would have forced WME to disclose financial details that historically discrete agencies had kept secret. In addition, Endeavor's IPO could have encouraged other majors, such as CAA and United Talent Agency, to do the same, but these companies are not yet as diversified as they are. Endeavor, whose assets also include Professional Bull Riders, Frieze Art Fair, NeuLion streaming company and the 160over90 marketing agency.
In the Endeavor files before the IPO, the group had a turnover of USD 2.05 billion for the first six months of 2019, with an operating profit of USD 10.3 million and a net loss $ 223 million. Ari Emanuel and Patrick Whitesell, the co-CEOs, as well as the CFO, Jason Lublin, Endeavor's President, Mark Shapiro, Marketing Director, Bozoma Saint John and Human Resources, Kerry Chandler, likely have millions of dollars each, for the moment, as well as Silver. Lake Partners, which became the first private equity firm to acquire Endeavor in 2012, has since acquired a significant but still minority stake.
In a pre-IPO roadshow video, Lublin said, "We will publicly be more agile and responsive to our customers and … give us capital and currency for mergers and acquisitions, which have been and will remain at the heart of our strategy. . "
In the same video, Emanuel adds, "I do not think there is another platform like ours. I have competition in the fields of advertising, talent agencies and sports, but they are all individual companies. … I am far ahead of you by miles and miles. "
Apparently, Wall Street did not buy what the executives were selling, at least not as much as they had hoped. Declaring the IPO is a sign Bankers, executives and all other parties involved were not convinced that the shares would have been well received and would have traded below expectations, even lowered recently.
The Writers Guild of America West has issued the following statement:
"The information that the IPO of Endeavor has been withdrawn shows that investors have not purchased the company's conflicting business practices."
September 26, 4:13 pm: Updated with WGA statement.
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