Endeavor Group pulls IPO after dropping stock price
Ari Emanuel's Endeavor Group has hit a major bump a day before they planned to go public.
The entertainment company will not offer its stock to the public on Friday and it has pulled its planned initial public offering.
This development comes one day after the Hollywood entertainment company and talent agency filed paperwork with the Securities Exchange Commission on Thursday lowering its expected price to $27, down from their initial filing which had the stock at $32.
Endeavor intially declined to comment about their IPO when reached by FOX Business, but the company later sent a statement confirming that it pulled the IPO. However, talk in Hollywood was that the company seemed confident as the stock prepared to hit the market. Apparently, all that has changed.
"They pulled the IPO because investors were not going to pay the price that they needed to make the private equity happy and make this work for them," Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management, told FOX Business.
"The value of Endeavor is substantially less than what they anticipated on the private markets," explains Gerber. "The public is avoiding a bunch of bad stocks that shouldn't be taken public."
The group, which also owns Ultimate Fighting Championship, had planned on offering 15 million shares and expected to raise about $360 million.
“They were trying to cash out people and they are trying to pay down debt and they are over-leveraged so they expected public investors, who aren’t smart enough to read profit sheets and balance statements, to buy," Gerber said.
The talent side of the Endeavor Group, WME, manages several of Hollywood’s top actors including Halle Berry, Matt Damon and Denzel Washington.
Endeavor's co-CEOs, Ari Emanuel, who is the inspiration behind hit HBO show "Entourage;" Patrick Whitesell and president Mark Shapiro, may have made millions if the firm went public.
The adjustment in price Thursday was the first sign to outside investors that the timing of the IPO may be wrong. Private equity firm Silver Lake, which is heavily invested in Endeavor, may have been behind the impetus for the shop going public prematurely.
There may have been a lot of pressure to go public because private investors wanted to get out, Gerber said.
"The executives had the job to decide if this is the right time to do this, or maybe they wait another year until they are in a better position of strength,” Gerber who was never a fan of the IPO, said
In addition to the talent agency, Endeavor Group is a global entertainment agency that owns and or manages over 700 events annually, including sporting events covering 20 sports across 25 countries, international fashion weeks, art fairs, and music, culinary and lifestyle festivals.
Despite the wide reach of the company, investors may still view the firm as fiscally challenged.
“Companies like Endeavor do not have a profitable business model, they are just not profitable the way they are set up," Gerber said.
"They over-leveraged to buy IMG and UFC and they are swimming in debt, I think it is like $4 billion," Gerber said. "Why do I want this? I am better off owning the debt. That is the issue they faced, so it makes sense that they pulled their IPO."
