As Endeavor grows from a small startup to a worldwide entertainment conglomerate, it cultivates a reputation for boundless ambition and relentless competition.
So when the company withdrew on Thursday, just hours before it started trading on the New York Stock Exchange, it was more than a temporary failure. Make an effort not only to lose a few hundred million dollars of fresh capital, but also to lose your air of invulnerability.
Endeavor CEO Ari Emanuel found himself bloody in the unfamiliar Wall Street arena.
champagne bottles on Avenue of the Stars, "said a studio artist, citing a CAA headquarters. "I mean, I feel bad for the people working at WME, but there are many who wanted to see this blast in Ari's face."
The first priority is to reduce morale. In WME, many agents were compensated for stocks that failed to liquidate. Some are encouraged to use capital instead of larger cash bonuses. The IPO would lead to a one-year block period, after which agents would be free to sell their shares. Now this is thrown in the air and there is no telling when agents will be able to pay the money.
This raised concerns that agents could walk.
"Surely agents will start leaving," speculates
Leaving the company may not be so simple ̵
"They are not stupid," a senior CAA agent told WME management. "People will wait to see how they are communicated (compensation plans). But we did get some calls.
Another concern is how this enters into a six-month confrontation with the Writers Guild of America. The union is seeking law firms to levy fees on television packaging, which has led to more than 7,000 writers firing their agents in April. This battle, combined with the public scrutiny of Endeavor's finances as part of the IPO process, is demoralizing to many agents.
The guild launched a campaign to undermine Endeavor's public list and claimed victory on Thursday, issuing a statement saying that IPO investors were intimidated by the agency's conflicts of interest.
Endeavor and WME representatives declined comment Friday. On Thursday, after the IPO was withdrawn, Endeavor said in a statement that it "will evaluate the timeframe for the proposed offering as market conditions evolve." Analysts cited several other problematic IPOs, such as WeWork and Peloton, as a sign that the market was
Demand Endeavor's equity investors are stepping up, and Emanuel and company advisers fear it will be trading well below what they think is worth it. Emanuel was on a $ 25 million bonus line if his market cap exceeded $ 7.5 billion, but the IPO price imposed him with one billion of that threshold. As harmful as the decision to withdraw the IPO was to morality, it would be worse if the shares were publicly announced and tanks.
Wall Street's repulsion could limit some of the company's growth plans in the short term. The company hoped to raise $ 546.8 million in fresh capital, of which about $ 500 million would be used to pay off debt. In the face of soft demand, Endeavor lowered its price range Thursday morning from $ 30- $ 32 per share to $ 26- $ 27 per share. That would mean that the supply would raise $ 361.6 million.
The failure to raise this amount, modest by Wall Street standards, also represents a black eye for Goldman Sachs, who handles the signing.
Emanuel had marketed his company as an incomparable talent platform. But investors saw a company with different stakes – including WME, UFC, Professional Bull Riders and Miss Universe – hampering valuation, along with significant debt burden and recent operating losses.
The final straw appeared to be the launch of an IPO for Peloton, a manufacturer of exercise bikes. Peloton shares had a rough opening day on Thursday, falling 11% below the suggested price.
The response within the WME of Endeavor's post-IPO plan is significant, as the agency is a key profit center for a fast-growing company. through acquisitions in the last five years. The agency has long been backed by a core group of senior agents who are loyal to Emmanuel and the agency. Despite the disappointment of the scandalous IPO, these ties and belief in Emmanuel's leadership have only intensified, according to multiple sources close to the situation.
"We will continue our business and this business will be fine." a solid WME insider.
Justin Kroll contributed to this report.