Endeavor Resumes Quest For IPO After 18-Month Break

Dade Hayes and Jill Goldsmith
·4 min read
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Cut to Endeavor IPO, Part 2: The Reimagining.

Endeavor Group Holdings, owner of assets like talent agency WME, sports leagues the UFC, a production outfit and modeling firm IMG, has renewed its quest to go public. The IPO is planned for later this year.

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In an SEC filing today, CEO Ari Emanuel made the case for the company’s resilience. “As challenging a year as 2020 was, it underscored the strength, creativity, and resilience of our people who mobilized time and time again in the face of overwhelming odds,” the exec wrote in a letter included in the filing. “We made difficult decisions but worked as a team to find creative solutions and best position the business for the future.”

Endeavor ditched its IPO at the last minute in the fall of 2019 when market conditions deteriorated and the company sensed it might not reach its fundraising goal.

Along with Emanuel, executive chairman Patrick Whitesell and president Mark Shapiro are two other key members of the management team.

The coronavirus pandemic, which wreaked havoc on the entertainment business, sports and other sectors in 2020, hit Endeavor hard, the company acknowledged. But it “delivered strong revenue growth prior to the impact of Covid-19,” the filing maintained.

In 2020, the company took in just shy of $3.5 billion in revenue, down from $4.6 billion in 2019. On a net basis, the 2020 bottom line showed a loss of $625.3 million but adjusted EBITDA reached $583.6 million, compared with $733.5 million in 2019.

The amount Endeavor intends to try to raise is not yet clear. The filing identifies $100 million, but that’s just a placeholder until the picture comes more fully into focus. In 2019, the company entered the final days before its IPO hoping to raise up to $712 million, but when it encountered softness in pricing — and other offerings like Peloton wobbled — it pulled the plug. The filing was officially withdrawn on October 16, 2019.

Endeavor, which owns 50.1% of the UFC, said it intends to purchase the remaining stake in the mixed-martial-arts circuit. The maneuver will require Endeavor and its investment partners to raise $1.7 billion in a private transaction separate from the IPO.

If all goes according to plan, Endeavor will trade on the New York Stock Exchange under the ticker symbol “EDR.” The company has more than 6,400 employees working in 28 countries, about 4,300 of them in the U.S.

One clear difference in the operating environment between 2019 and today is a settlement between the Writers Guild of America and major talent agencies over packaging. The WGA was an outspoken critic of Endeavor’s IPO plans, saying it would enrich company management at the same time the guild believed it was self-dealing by producing projects and also representing attached talent. The guild managed to win concessions from the agencies to ban packaging and impose other restrictions. WME and the WGA reached terms in February on the long-gestating settlement.

Endeavor Content is likely to face a different future in light of the guild agreement. The settlement caps Endeavor’s ownership of the content unit at 20% and the company is looking at strategic options for the rest. It remains to be seen what that limited stake in content will mean for investor interest.

The broader IPO market, however, has been booming. Emerging companies like Poshmark have soared in initial trading, and the fashion for special-purpose acquisition companies, or SPACs, continues to surge. SPACs have gotten behind everything from sports betting firm DraftKings to a recently unveiled merger between fitness firms Myx and Beachbody.

Emanuel, Whitesell and private equity firm Silver Lake will control more than 50% of the voting power in Endeavor, meaning it will be classified as a “controlled company.” As such, they are opting out of certain corporate governance requirements of the NYSE. Among those are rules that would require the company’s board of directors to have a majority of independent directors.

According to the filing, Emanuel and Whitesell each earned $1.17 million in base salary last year, from January 1 to April 15. From April 16 through the end of the year, they forfeited their salaries due to Covid-19, though they remained eligible for bonuses.

Despite the ravages of the pandemic, Emanuel sees plenty of opportunity for the company. “The power of the Endeavor platform has been on full display as we have brought commercial activity back online, guided our clients through an unprecedented set of events, and fostered innovation of new digital business models that will drive growth well into the future,” he wrote. “The events of 2020 reminded us of the enduring value of premium intellectual property and content, while reinforcing the strength of our position within the sports and entertainment ecosystem.”

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