×
You will be redirected back to your article in seconds

Endeavor IPO Delay Sends Shockwaves Through Agency Business

As Endeavor grew from a small startup to a worldwide entertainment conglomerate, it cultivated a reputation for limitless ambition and ruthless competition.

So when the company withdrew its public offering on Thursday, mere hours before it was to begin trading on the New York Stock Exchange, it was more than a temporary setback. Endeavor not only lost out on several hundred million dollars in fresh capital — it also lost its air of brash invulnerability.

Endeavor CEO Ari Emanuel found himself bloodied in the unfamiliar arena of Wall Street.

“Pretty sure they are popping champagne bottles on Avenue of the Stars,” said one studio exec, referring to CAA headquarters. “I mean I feel bad for the people working at WME, but there are plenty of people that wanted to see this blow up in Ari’s face.”

The first priority is shoring up morale. At WME, many agents have been compensated in stock units, which they have been unable to liquidate. Some have been encouraged to take equity in lieu of larger cash bonuses. The IPO would have triggered a one-year lock-up period, after which agents would have been free to sell their shares. Now that’s been thrown up in the air, and there’s no telling when agents will be able to cash out.

That has prompted fears that agents could walk.

“For sure agents are going to start leaving,” speculated an agent at a rival firm.

Leaving the company may not be so simple — many clients could prove more loyal to the agency than to their agents. And industry sources speculate that WME will move to compensate those who took stock in lieu of cash to avoid defections. It’s also possible that the company could arrange a liquidity event through private equity partners.

“They’re not stupid,” said a senior CAA agent of WME leadership. “People are going to wait a beat and see how (compensation plans) are communicated. But we did get some calls.”

Another concern is how this plays into the six-month standoff with the Writers Guild of America. The union is seeking to bar agencies from collecting TV packaging fees, which led to more than 7,000 writers firing their agents in April. That battle, coupled with the public scrutiny of Endeavor’s financials as part of the IPO process, has been demoralizing for many agents.

The guild has been campaigning to undermine Endeavor’s public listing, and claimed victory on Thursday, issuing a statement saying that IPO investors were scared off by the agency’s conflicts of interest. The battle continues to be fought in federal court, with no obvious resolution on the horizon.

Representatives for Endeavor and WME declined to comment on Friday. On Thursday, after pulling the IPO, Endeavor said in a statement it would “evaluate the timing for the proposed offering as market conditions develop.” Analysts have pointed to several other problematic IPOs, like WeWork and Peloton, as a sign that the market is cooling toward public offerings of companies without a strong bedrock of earnings at present.

Investor demand for Endeavor stock was underwhelming, and Emanuel and the company’s advisers feared that it would trade well below what they think the company is worth. Emanuel was in line for a $25 million bonus had the market cap exceeded $7.5 billion, but the IPO price put it a billion short of that threshold. As damaging as the decision to pull the IPO was for morale, it would have been worse had the stock gone public and tanked.

The rebuff from Wall Street could curb some of the company’s growth plans, in the short term. The company had hoped to raise $546.8 million in fresh equity, of which about $500 million would have been used to pay down debt. Faced with soft demand, Endeavor cut its price range on Thursday morning from $30-$32 per share to $26-$27 per share. That would have meant the offering would have raised $361.6 million.

The failure to raise that amount, modest by Wall Street standards, also represents a black eye for Goldman Sachs, which led the underwriting.

Emanuel had pitched his company as an unparalleled platform for talent. But investors saw a company with disparate holdings — including WME, the UFC, Professional Bull Riders, and the Miss Universe pageant — that made it difficult to value, along with a substantial debt load and recent operating losses.

The final straw appeared to be the performance of the IPO for Peloton, a maker of exercise bikes. Peloton shares had a rough opening day of trading on Thursday, tumbling 11% below the offering price.

The response within WME to Endeavor’s post-IPO plan is significant because the agency is a key profit center for the company that has grown rapidly through acquisitions during the past five years. The agency has long been bolstered by a core group of senior agents who have been loyal to Emanuel and to the agency. Despite the disappointment over the scuttled IPO, those bonds and faith in Emanuel’s leadership has only strengthened, according to multiple sources close to the situation.

“We’re going to go about our business, and this business will be fine,” a WME insider asserted.

Justin Kroll contributed to this report.

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 [...]

  • Any Given Wednesday With Bill Simmons

    Spotify in Talks to Acquire Bill Simmons' The Ringer: Report

    Spotify is in early talks to acquire The Ringer, the digital content and podcast network launched by ESPN alum Bill Simmons in 2016, according to a report in the Wall Street Journal. A representative for Spotify declined to comment on the report. Reps for Ringer did not immediately respond to a request for comment. Spotify’s [...]

More From Our Brands

Access exclusive content