When Endeavor filed to go public on March 31, practically two years after its first (unsuccessful) effort, it made a refined however important change in its pitch to traders.
In Endeavor’s first submitting on Might 23, 2019, the opening line in its prospectus learn “Endeavor is a world leisure, sports activities and content material firm, dwelling to lots of the world’s most dynamic and fascinating storytellers, manufacturers, dwell occasions and experiences.” The emphasis was on leisure, and storytellers. Becoming for a corporation based and constructed on the success of the creators and performers of movie and tv.
In its second try on March 31, 2021, the opening line in its prospectus learn “Endeavor is a premium mental property, content material, occasions, and experiences firm.” Whereas in 2019, the corporate’s illustration enterprise was entrance and middle, with Endeavor saying its job was to “create worth for our shoppers – expertise, manufacturers and house owners of mental property (‘IP’),” now in 2021 it pitches itself because the proprietor of the IP, an organization that was “based as a consumer illustration enterprise” however has “expanded” within the final couple of years to be one thing fairly completely different: What it calls an “built-in world platform.”
The profound affect of the pandemic on Endeavor’s enterprise has led to a reorganizing of its focus, with sports activities and occasions now on the forefront, and with preventing league UFC and Skilled Bull Riders highlighted as its key IP holdings moderately than expertise company WME or modeling agency IMG.
“We consider that our Firm is distinguished by our possession of mental property,” the corporate writes in its new prospectus. Whereas its illustration enterprise took a giant hit, the corporate’s owned sports activities phase — led by its stake in UFC and PBR — noticed its income rise 1.8 %, with the MMA firm capable of maintain its PPV fights largely uninterrupted.
Whereas the pandemic battered Hollywood in 2020, inflicting Endeavor’s illustration enterprise to see a 43.6 % decline year-over-year as Hollywood productions and music venues shut down, the corporate’s owned sports activities phase — led by its stake in UFC and PBR — noticed its revenues rise by 1.8 %, with the MMA firm capable of proceed its pay-per-view fights largely uninterrupted (albeit with out dwell crowds).
“The vast majority of UFC’s revenues are earned from contractual long-term media and pay per view offers that allowed UFC to proceed producing robust outcomes, regardless of the pandemic,” wrote Moody’s analysts Scott Van den Bosch and Stephen Sohn, noting that Endeavor “used the proceeds [from UFC] to offer liquidity to WME IMG in 2020.”
Now, as a part of its IPO push, Endeavor says it is going to purchase out the 49 % stake of UFC that it doesn’t already personal, giving it complete management of the corporate and its cashflows, giving the corporate the money enhance it must emerge from the pandemic stronger.
One other doubtless good thing about the UFC buyout is a discount of Endeavor’s heavy debt load, which now totals practically $6 billion. Moody’s in its be aware “tasks Endeavor will pursue a extra conservative monetary coverage as a public firm with the aim to scale back web leverage.”
“The deliberate 100% buyout of UFC’s important money circulate base, which was resilient in the course of the COVID-19 pandemic, would in all probability profit WME IMG’s and Endeavor’s credit score profiles,” wrote S&P World analysts Jing Li and Emile J. Courtney in a be aware after the IPO submitting was launched. “We consider the UFC buyout would in all probability take away governance-related constraints on Endeavor, enabling it to extract money from UFC to assist WME IMG, which was considerably impaired by the pandemic, or for some other funding aim.”
What are these investments? The prospectus calls them “new digitally targeted in-home leisure enterprise fashions,” however shut watchers of Wall Avenue will acknowledge two of the most popular tendencies: Sports activities betting, and direct-to-consumer streaming.
The pitch has already discovered consumers. Along with its IPO, Endeavor revealed that it has secured greater than $1.7 billion in a personal placement with Tencent, Elliott Administration, Silver Lake and Third Level, amongst different events. The non-public placement will assist fund the UFC buyout, and is an indication of buy-in from main Wall Avenue gamers.
With Tesla firebrand Elon Musk on its board, and with its future pitch constructed round companies which have despatched share costs of corporations like DraftKings and Disney sky-high, Endeavor is hoping to journey that wave on the general public markets as properly, carrying its legacy consumer illustration enterprise together with it.
A model of this story appeared within the April 7 subject of The Hollywood Reporter journal. Click here to subscribe.