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At the eleventh hour, Endeavor withdrew its proposed public offering on Friday due to investors' mixed reaction to the company's financial results and the instability of the IPO market in recent weeks.
A knowledgeable source confirmed that Endeavor had announced its intention to be published as of Friday with an offer to buy 15 million shares at a price of between 26. $ and $ 27. It is unclear whether the company will continue its IPO at a later date.
Endeavor in a statement described the decision as a postponement. "Endeavor will continue to evaluate the timing of the proposed offer based on changing market conditions," the company said.
Endeavor's move comes as investors in the IPO have become more and more fearful in recent months. WeWork delayed its bid last week and peloton maker Pelota had a disastrous opening day on Thursday, as its stock traded well below the IPO price. The rapid drop in Peloton shares had a significant impact on the decision to postpone Endeavor.
"IPO investors are on strike right now," said Kathleen Smith, director of Renaissance Capital, IPO's exchange-traded fund manager. "This had an impact on Endeavor's request for agreement."
Smith said that without this cash injection, Endeavor could be forced to manage more conservatively or to forgo new acquisitions – especially in light of the company's debt.
The filing of the offer at this time raises questions for Endeavor's investors, including its leading private equity partner, Silver Lake, and for the insiders of various companies in the Endeavor group. At WME in particular, it's no secret that many insiders were expecting a windfall from the long-anticipated IPO.
Endeavor had hoped to become public with a market capitalization of nearly $ 8 billion. But with the price drop on Thursday morning, market capitalization fell to just $ 6.5 billion. At this level, the price would have been about equal with the last private market valuation in 2017 – a very poor return for these investors.
Chief Executive Officer Ari Emanuel was to receive a $ 25 million bonus if the market capitalization reached $ 7.525 billion. The price reduction also put this bonus out of reach.
The news of the withdrawal of the offer was a surprise to many initiates at Endeavor, including those who came from the west coast to witness what was to be a traditional hammering ceremony to announce the beginnings of the company on New York Stock Exchange.
Endeavor has experienced turbulence from the very beginning after the unveiling of its IPO prospectus at the end of May. The company has reported net losses in four of the last five years. The company's financial statements were also complicated by the recent series of acquisitions that left Endeavor indebted for $ 4.6 billion.
The underlying problem of lack of free cash flow, significant leverage and lack of sustained profitability in key divisions left potential investors disappointed. Analysts have also warned investors against the complicated plan of the company to issue four classes of shares. A select group of insiders including Emanuel and President Patrick Whitesell were to have received additional voting shares to retain control of the board of directors.
Endeavor's IPO was also a first in the WGA's aggressive campaign to prohibit talent agencies from collecting packaging fees for television series and films, and to prevent agencies to establish links with production entities. WME is the leader in the television packaging industry, given its formidable list of writers and writers.
The guild issued a statement Thursday in which she welcomed the demise of this offer. "The information that the IPO of Endeavor has been withdrawn shows that investors have not purchased the company's conflicting business practices," said a WGA spokesman.
Endeavor sought to diversify with the launch of the Endeavor Content production, distribution and sales division. This effort was made possible by the acquisition in 2014 by Endeavor of the IMG Sports Center. IMG had a production and sales infrastructure around the world to manage the hundreds of sporting events that it produces each year. After Endeavor took over IMG, this infrastructure was expanded to include sales of entertainment and documentary products.
WGA's efforts to reform the rules governing how talented agents represent members of the guild were fueled in part by Endeavor's growth ambitions. The guild targeted Endeavor's IPO by warning investors that WME had lost 1,400 writers since April, when the impasse between the guild and talent agencies pushed more than 7,000 members of the WGA to dismiss their agents en masse.
Dave McNary contributed to this story.
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