×
You will be redirected back to your article in seconds

Endeavor Pulls IPO Amid Investor Concerns, Market Instability

At the eleventh hour, Endeavor has pulled its plan for a public offering of shares on Friday in the face of lukewarm investor reaction to the company’s financials and instability in the IPO market in recent weeks.

A knowledgeable source confirmed that Endeavor has tabled plans to go public as of Friday with an offering of 15 million shares priced between $26-$27. It’s unclear if the company will still pursue an IPO at a later date.

Endeavor in a statement described the decision as a postponement. “Endeavor will continue to evaluate the timing for the proposed offering as market conditions develop,” the company said.

Endeavor’s decision comes as IPO investors have become increasingly skittish in recent months. WeWork delayed its offering last week, and bicycle maker Peloton had a disastrous opening day on Thursday, as its shares were trading well below the IPO price. The quick drop of Peloton shares had a big impact on Endeavor’s decision to postpone.

“IPO investors are on strike right now,” said Kathleen Smith, principal at Renaissance Capital, a manager of IPO exchange traded funds. “This impacted the demand for the Endeavor deal.”

Smith said that without the cash infusion, Endeavor may have to manage more conservatively or forgo further acquisitions — especially in light of the company’s debt load.

The tabling of the offering for now raises questions for Endeavor CEO Ari Emanuel on next steps, and for Endeavor’s investors, including its primary private equity partner Silver Lake, as well as for insiders at the various companies under the Endeavor umbrella.

At WME in particular, it’s no secret that numerous insiders have been expecting to see a windfall from the long-planned IPO. There’s sure to be some frustration expressed now that there’s a delay in monetizing those shares. WME’s rivals were quick to note that the industry powerhouse may be vulnerable to having high-performing agents recruited away by competitors for the first time in years. Endeavor may have to pay out some retroactive bonuses to calm the waters, industry insiders speculated.

At the same time, sources inside WME said there remains among the agency’s top managers a strong sense of solidarity with Emanuel, despite the ups and downs of the IPO process. “Nobody is betting against Ari. It was just a bad moment” for an IPO, said a senior WME source.

Endeavor had hoped to go public with a market cap near $8 billion. But investors were underwhelmed by the IPO road show, causing a price drop on Thursday morning from $30-$32 per share to $26-$27. At that price, the market cap would have dipped to just $6.5 billion.

Emanuel was set to receive a $25 million bonus had the market cap reached $7.525 billion. The price cut put that bonus out of reach.

From Emanuel’s perspective, sources say, the decision to yank the IPO at the last minute came down to an unwillingness to let the company be devalued because of a shaky overall market for new offerings, as evidenced by the struggles of ride-sharing giants Uber and Lyft and most recently, Peloton.

The news that the offering had been withdrawn came as a surprise to many insiders in Endeavor, including some who traveled from the West Coast to be on hand for what was scheduled to be a traditional gavel-banging ceremony to herald the company’s debut on the New York Stock Exchange.

Endeavor faced turbulence from the start after unveiling its IPO prospectus in late May. The company revealed it had posted net losses in four of the last five years. The company’s financial statements have also been complicated by its recent string of acquisitions that left Endeavor shouldering some $4.6 billion in debt.

The underlying issue of a lack of free cash flow, significant leverage and lack of sustained profitability in key divisions left prospective investors wary. Analysts also cautioned investors about the company’s complicated plan to issue four classes of shares. A select group of insiders including Emanuel and chairman Patrick Whitesell were to have received super-voting shares that would allow them to maintain control of the board.

Endeavor’s IPO plan also ran head-first into the WGA’s aggressive campaign to ban talent agencies from collecting packaging fees on TV series and movies and to bar agencies from having corporate ties to production entities. WME has been the industry leader in TV packaging, given its once-formidable roster of writers and showrunners.

The guild issued a statement on Thursday taking credit for the demise of the offering. “Reports that the Endeavor IPO has been withdrawn show that investors didn’t buy the company’s conflicted business practices,” a WGA spokesperson said.

Endeavor has sought to diversify its operations with the launch of the Endeavor Content production, distribution and program sales arm. That effort was made possible by Endeavor’s 2014 acquisition of sports powerhouse IMG. IMG had production and sales infrastructure around the world to handle the hundreds of sporting events it produces ever year. After Endeavor took over IMG, that infrastructure was expanded to incorporate sales of entertainment and documentary fare.

The WGA’s effort to reform the rules governing how talent agents represent guild members was fueled in part by Endeavor’s growth ambitions. The guild took aim at Endeavor’s IPO by pointing out to investors that WME has lost 1,400 writer clients since April, when the impasse between the guild and talent agencies led to more than 7,000 WGA members firing their agents en masse.

Dave McNary contributed to this story.

More Biz

  • Deborah Dugan

    Reports of Ousted Grammy Chief Demanding $22 Million Are 'Outrageous,' Sources Say

    UPDATED: As the war of words between the Recording Academy and ousted president/CEO Deborah Dugan continues to escalate, interim boss Harvey Mason Jr. today issued a statement to the Academy’s membership about Dugan’s alleged misconduct and warned about “leaks and misinformation.” The letter claims that Dugan’s attorney Bryan Freedman sought “millions of dollars” for his [...]

  • Frontrunners Emerge As BBC's Tony Hall

    Frontrunners Emerge as BBC Boss Tony Hall Set to Leave Broadcasting Behind

    As the U.K. industry reacts to news of Tony Hall’s intention to depart the BBC this July, top-level executives including Charlotte Moore and Tim Davie as well as external contenders such as Channel 4’s Alex Mahon are beginning to emerge. Variety understands that Lord Hall, who has headed the BBC for seven years as director [...]

  • Recording Academy President/CEO Deborah Dugan participates

    Executive Assistant Preparing Lawsuit Against Ousted Grammy Chief

    In the latest twist in the increasingly bitter exit of Deborah Dugan from the Recording Academy after just five months, the ousted president/CEO is about to face a lawsuit from her former assistant, Claudine Little, who has retained former Harvey Weinstein/ Charlie Walk attorney Patty Glaser to represent her, two sources tell Variety. The news was [...]

  • Two Rivers Media Buys Out Parent

    Two Rivers Media Buys Out Parent Kew Media Group's Stake In Business

    Two Rivers Media has bought out parent group Kew Media Group’s minority stake in the business. Formed by former STV Productions head Alan Clements in January 2019, the production outfit behind Channel 5’s recent “Susan Hill’s Ghost Story” launched with the backing of Kew, Noble Grossart Investments and Channel 4’s Indie Growth Fund. Noble Grossart [...]

  • Grammy Awards 60th Annual Grammy Awards,

    Recording Academy Paid Millions Annually to Outside Law Firms

    Among the concerns listed in a memo sent to the Recording Academy’s head of HR by president/CEO Deborah Dugan before she was placed on administrative leave Thursday was an item about the organization’s “exorbitant and unnecessary” legal fees to outside law firms, according to sources familiar with the document. According to the most recent 990 [...]

  • Chuck D of Public EnemyGods of

    Public Enemy’s Chuck D Slams Grammys Over Deborah Dugan Ouster

    Chuck D, frontman of Public Enemy — who are receiving the Lifetime Achievement Awards at the Grammys next week — posted a long statement on Instagram criticizing the Recording Academy over its sudden ousting of new president/CEO Deborah Dugan yesterday. Dugan, who had been in the job only five months, was placed on administrative leave after [...]

More From Our Brands

Access exclusive content