Endeavor — the parent company to the UFC — will look to raise significant funds later this year when the powerful talent agency goes public for the first time with an initial public offering (IPO).
The company headed up by Ari Emanual and Patrick Whitesell has made significant investments over the past few years but none bigger than the $4 billion plus spent to purchase the UFC back in 2016.
Rumors about Endeavor going public have swirled for several years but now the company has filed paperwork with the Securities and Exchange Commission for an IPO launch at some point in the latter part of 2019.
The paperwork filed by Endeavor to announce they were going public was met with a lot of skepticism from many Wall Street experts, who cast doubt on the long term viability of the company. The latest prospective on the company comes from Wall Street analyst Todd Juenger, who sent out a statement to his investors warning of the potential pitfalls of buying into Endeavor when their IPO launches later this year.
Juenger, who is a senior analyst at Bernstein, says that Endeavor could stand to raise around $900 million when going public but the majority of that money would likely go to paying down substantial debt the company has already incurred. Even with that money going towards the Endeavor debt, the outstanding balance would still sit at around $3.1 billion.
It’s for that very reason why Juenger stated investing in Endeavor would ‘not be for the faint of heart’ due to the lingering questions about the company’s long term business plans.
When it comes to Endeavor’s ability to generate profits, Juenger pointed specifically to the UFC as arguably the ‘most interesting brand’ that the company has in its portfolio.
“The opportunity to own a stake in a dominant league in a growing sport with global potential doesn’t come along every day,” Juenger wrote about the UFC. “MMA is a growing sport with international appeal and an audience that skews young and male, a demographic that is very hard for brands to reach.”
That said, Juenger says that the UFC also comes along with certain inherent risks due to the mixed martial arts promotion requiring star power to stay viable on a larger scale with fighters like Conor McGregor bringing in huge sums of money whenever he competes.
”There are also a number of existential risks, including reliance on bombastic UFC star personalities, the violence inherent in MMA combat, pressures on representation packaging and relationships with talent,” Juenger said.
”Conor McGregor is a great example. But one of his antics injured innocent bystanders in 2017 and another one led to his arrest on felony robbery charges.”
While no specific financial figures for the UFC were released in the paperwork filed by Endeavor when going public, Juenger estimates that the promotion brought in approximately $650 million in revenue in 2018.
Juenger also noted that Endeavor’s ongoing war with the Writers Guild of America — a union representing many of the writers in film and television — could also potentially damage the business going forward as that feud continues with several lawsuits filed recently.
“Current investors must surely be uncomfortable operating a volatile business under such a large debt load,” Juenger said “So we think Endeavor is motivated to go public and raise equity to reduce this indebtedness, which could translate into a more favorable offering price for equity investors.”