UFC parent Endeavor pops 19% in IPO debut, adds Elon Musk to board

UFC Fight Night Frankie Edgar

Endeavor Group surged as much as 19% on Thursday in its IPO debut, hitting an intra-day high of $28.47.

The parent company of UFC and the William Morris talent agency raised $511 million in the IPO, selling 21.3 million shares at a valuation of about $10 billion. Endeavor Group priced its IPO at $24 per share.

The holding company saw a slow down in business amid the pandemic, as it heavily depends on live entertainment. Revenue declined 24% to $3.5 billion in 2020, according to Endeavor’s S-1 filed with the SEC last month.

In anticipation of going public, Endeavor Group added Tesla CEO Elon Musk to its board of directors.

But David Trainer, CEO of New Constructs is cautioning investors about Endeavor Groups “nosebleed” valuation in an investment note on Wednesday.

“No matter how many Elon Musks it adds to its board, Endeavor’s expected valuation of $10 billion is in nosebleed territory,” Trainer said, adding that the company’s lack of profits doesn’t justify such a high valuation. Endeavor posted net losses of more than half a billion dollars in both 2019 and 2020.

Endeavor trades under the ticker symbol “EDR” on the New York Stock Exchange.

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The UFC’s majority owner Endeavor is eyeing a valuation of over $10 billion for its upcoming IPO

Francis Ngannou UFC

The Ultimate Fighting Championship’s parent company, Endeavor Group Holdings, is eyeing a valuation of over $10 billion for its upcoming IPO, according to an S-1 prospectus filed by the firm.

Endeavor plans to sell 21.3 million shares priced between $23 and $24 a share in hopes of raising $511.2 million in the public offering.

The firm will also raise up to $1.3 billion from private investors like Abu Dhabi’s state-owned investment company Mubadala and the owner of the New England Patriots Robert Kraft.

Endeavor plans to trade on the New York Stock Exchange under the ticker “EDR.”

Hollywood power broker Ari Emanuel, the inspiration for Ari Gold in HBO’s “Entourage,” founded Endeavor in 1995 as a talent agency and has since expanded the business to include sports businesses, live events, and concerts.

“The events of 2020 reminded us of the enduring value of premium intellectual property and content while reinforcing the strength of our position within the sports and entertainment ecosystem,” Ari Emanuel wrote in the company’s S-1 Prospectus.

“We believe being a public company will enable us to accelerate this mission and further the vision we set out in 1995 to build a company for where the world was headed. We hope you’ll join us,” Emanuel added.

Endeavor’s major holdings include the UFC, the Miss Universe Pagent, the talent agency WME (which boasts clients like Dwayne “the Rock” Johnson), and Euroleague Basketball. The company plans to use $835.7 million of its IPO funds to buy the portion of the UFC that it doesn’t already own.

Endeavor also recently nominated Elon Musk to its board of directors in the lead-up to its IPO.

The firm had previously attempted to raise $600 million in its first IPO effort back in 2019 at a valuation of roughly $6.5 billion, but ultimately called it off citing poor market conditions after a less than stellar response from investors.

Part of what may have scared off potential buyers is Endeavor’s massive debt load. The firm has $5.9 billion of debt on its books with only around $1 billion in cash.

Net losses in 2020 topped $650 million on $3.4 billion in revenue as well, according to the company’s SEC filings.

If Endeavor does go public, founder Ari Emanuel and executive chairman Patrick Whitesell would have stakes totaling around $900 million, but the company’s biggest shareholder would be Silver Lake, with a stake valued at more than $4 billion.

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