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 knowledgable 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 in a statement.
Endeavor’s decision comes as IPO investors have become increasingly skittish in recent months. The WeWork offering was also delayed, 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 debt load.
The tabling of the offering for now raises questions for Endeavor’s investors, including its primary private equity partner Silver Lake, and 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.
The news to forgo the offering 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’s financial statements have 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 underwhelmed. Analysts also cautioned investors about the company’s complicated plan to issue four classes of shares. A select group of insiders including CEO Ari 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.
Meanwhile, 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.