The company's way forward likely includes additional financing, though it may not be valued at the $8 billion or more that it was initially hoping for.
“Shock and sadness,” says an insider. That’s just one description of the feeling among WME employees Thursday after word spread that its parent company, Endeavor Group, was tabling its initial public offering just a day before shares were to begin trading on the New York Stock Exchange.
At one point, Wall Street was expecting Endeavor to raise up to $900 million via its IPO , and even if it used most of that to pay down debt, it would still carry about $3 billion on its books, a massive load for a company that reported 2018 earnings of $551 million, after interest, taxes, depreciation and amortization.
Executives, though, did attempt to tout Endeavor’s diversity, including in digital technology, largely by way of its $250 million 2018 acquisition of NeuLion, which provides streaming and distribution for clients like the NFL, NBA, Univision and UFC, the latter of which Endeavor acquired for $4 billion in 2016. But in an era of Netflix, Amazon Prime Video, Hulu and soon-to-launch Apple TV+ and Disney+, Wall Street wasn’t confident in NeuLion’s prospects.
While WME is no longer Endeavor’s majority business, the agency’s battle with the Writers Guild of America over packaging fees and affiliate production at least added more uncertainty to the IPO, and one strategy now that the IPO is delayed may be to settle the dispute between writers and their agents. Some suggest de-consolidation and layoffs might also be in the cards sans IPO. “A path forward for Ari and Endeavor means changing its culture and aspirations.
And, say some insiders, Endeavor must figure out a way to keep its top agents and executives, many of whom have accepted equity in the company in exchange for compensation or bonuses. Now that they won’t be getting a hefty windfall from an IPO , Endeavor is said to be considering ways to let key employees liquidate their stakes in the company should they choose to do so.
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