UPDATE 2-Talent agency Endeavor abandons IPO amid weak investor demand

By Joshua Franklin
Updated

(Recasts with statement, adds details from source)

By Joshua Franklin

Sept 26 (Reuters) - Endeavor Group Holdings, the U.S. entertainment and talent agency company backed by Hollywood powerbroker Ari Emanuel, said on Thursday it had abandoned its initial public offering (IPO) following weak stock market investor demand.

It was the latest black eye for the U.S. IPO market, coming on the heels of struggles for several high-profile offerings such as SmileDirectClub and WeWork owner We Company.

While the stock market is hovering near all-time highs, investors are worried that the poor stock trading performance of companies such as ride-hailing leader Uber Technologies Inc following its IPO could indicate that pumped-up valuations in such listings have reached their peak.

Endeavor pulled its $400 million IPO late on Thursday, hours before it was scheduled to price and one day before it was due to list on the New York Stock Exchange. It had lowered its indicated price range earlier in the day in a futile bid to salvage it.

As of late Wednesday, Endeavor had been in talks with investors to price its IPO just below its original $30 to $32 target range, according a person familiar with the matter.

However, market demand softened further in light of the first-day trading of fitness startup Peloton Interactive Inc , whose shares closed down 11.2% on Thursday following the pricing of its IPO on Wednesday.

Endeavor will revisit plans for an IPO in 2020 if market conditions improve, the source added, requesting anonymity to discuss the confidential deliberations.

Endeavor's businesses run the gamut from talent agency WME, which represents the likes of actor Dwayne Johnson, to mixed martial arts promotion company Ultimate Fighting Championship.

The company shares several characteristics with other IPOs that have struggled this year, such as a history of losses, a share structure giving top management operational control, and a heavy debt burden.

Endeavor's first-half net losses narrowed year-on-year to $192.6 million from $404.5 million. It reported a full-year profit in 2018 after losses in 2016 and 2017. In the first six months of 2019, revenue grew to $2.05 billion from $1.5 billion a year earlier.

Following a string of acquisitions in recent years, Endeavor's long-term debt at the end of June totaled $4.6 billion.

Emanuel, along with Chairman Patrick Whitesell and investor Silver Lake Partners, would have retained the vast majority of voting rights in the company after the IPO through a multi-class share structure.

Loss-making teeth alignment company SmileDirectClub has seen its shares tumble since its IPO earlier this month, while Uber and rival Lyft Inc, which have no stated timetable for becoming profitable, have also struggled since going public earlier this year.

Goldman Sachs, KKR, J.P. Morgan, and Morgan Stanley were among the underwriters on the Endeavor IPO. (Reporting by Joshua Franklin Editing by Tom Brown and Bill Berkrot)