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Investor fatigue deals knockout blow to UFC-owner’s flotation

by ace
DALLAS, TX - MARCH 14:  A detail of gloves worn by Anthony Pettis and Rafael dos Anjos in the Lightweight Title bout during the UFC 185 event at American A

It would certainly have been one of the most striking stock market fluctuations of the year.

The Endeavor Group, owner of the Ultimate Fighting Championship (UFC) and Miss Universe beauty pageant, planned to hit the market in an Initial Public Offering (IPO) that would have valued it at about $ 7.2 billion ($ 5, 85 billion).

The company was seeking to raise more than $ 465 million in the lawsuit – below $ 712 million or more than originally thought.

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Endeavor led UFC purchase for $ 4 billion in 2016

However, overnight, the company abandoned the plan. It is said that a lack of appetite among investors is behind the decision.

The pull fluctuation is another sign that the US IPO market has been overcooked. WeWork, a shared-office company, withdrew its planned IPO last week, while several other highly-praised companies, including Lyft and Uber lift apps and the Slack communications platform, saw their stock disappoint after reaching the market this year.

The same thing happened with the latest actions of the & # 39; new economy & # 39; coming to the market. Peloton Interactive, which sells connected fitness equipment and conducts interactive fitness classes, floated on Wednesday night and immediately saw its stock price fall 11%. Peloton's experience is thought to have influenced Endeavor's decision to file its IPO for now.

Peloton Interactive Press Photo
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Peloton Interactive lost ground in its market debut

All of this suggests that investors are starting to tire of companies in the & # 39; new economy & # 39; highly praised to come to the market with fantastic growth projections – and appropriately fantastic valuations – but which are not profitable here and now.

The effort, which lost $ 193 million in the first six months of the year with sales of $ 2 billion, appears to have affected this shift in sentiment.

This despite being anything but a 'new economy' company.

It began life in 1898 as the William Morris Agency, one of the first – and now the largest – Hollywood talent management agencies. Her first clients included two of the biggest movie stars in the early days, including Charlie Chaplin and Mae West, while current stars include Rihanna, the singer, and Charlize Theron, the actress.

Rihanna
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Rihanna is among Endeavor's celebrity clients

In recent years, the company has expanded rapidly with the acquisition, notably the $ 2.4 billion acquisition of IMG Worldwide, six years ago, of IMG Worldwide, the sports management agency founded by the late Mark McCormack, the legendary agent. that made a fortune for golfers Arnold Palmer and Jack Nicklaus by aligning lucrative deals with them.

He followed this deal by buying the rights to Miss Universe in 2015 from Donald Trump and, a year later, buying UFC, the mixed martial arts promotion company, for $ 4 billion.

Trump was the owner of Miss Universe Organization until 2015
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Donald Trump was the owner of Miss Universe Organization until 2015

The strategy behind both businesses, particularly the latter, was that they would offer a more predictable earnings stream than the "more expensive" profit derived from negotiating client-to-client contracts.

Nor has Endeavor's glamor been limited to its customers in the world of sports, show business and modeling.

The company was founded in 1995 by Ari Emmanuel, brother of Rahm Emanuel, former mayor of Chicago and former White House chief of staff under Barack Obama.

Emanuel, a longtime friend of Trump who has, however, already organized fundraising events for the Democratic Party, is considered one of Hollywood's most powerful figures. The prospectus published for Endeavor included, as a case study, how it turned Dwayne Johnson, a former fighter known as The Rock, into one of the highest paid movie stars in the world.

After the fluctuation, superagent Emanuel and his co-founder, Patrick Whitesell, would own 18.8% of the business but control 26.6% of their votes. The largest shareholder would continue to be Silver Lake Partners, the private equity firm, which would hold 42% of the shares, but almost 59% of the votes.

In addition to valuation, these disproportionate voting rights also seem to begin to postpone traditional institutional investors, whose support is critical to the success of an IPO.

This was certainly the case with WeWork, whose co-founder and now deposed chief executive, Adam Neumann, would have effectively retained control of the company after its floating.

Some investors expressed concern about CEO and co-founder Adam Neumann
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Co-founder Adam Neumann left WeWork this week

Even after cutting its valuation on Thursday, Endeavor – which had $ 4.6 billion in debt at the end of June – failed to convince these institutions to invest, despite having an illustrious list of consultants like Goldman Sachs, Morgan. Stanley, JP Morgan and Deutsche Bank trying to wring their arms.

The effort may well try again next year.

But for now, it is hard to avoid the conclusion that any extravagant loss-making company trying to break into the market will struggle to do so in today's environment.

Investors have had enough – and that could mean bad news for Silicon Valley, home to many of these companies, in the short term.

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