Two years after first announcing its intention to go public, UFC owner and talent agency parent Endeavor Group Holdings finally succeeded in its initial public offering.
Endeavor priced shares offered at $24 each Wednesday evening, selling 21.3 million shares in the IPO process, as well as millions of additional shares at the same price in a complex, concurrent transaction to cash out some shareholders and buy the minority stake of Ultimate Fighting Championship it didn’t own. The market reacted well to the debut, as Endeavor shares pushed up more than 8% in their first two days of trading on the New York Stock Exchange. The advance gives Endeavor a market cap of more than $11 billion.
“This is a company riding secular tailwinds as it relates to content and experiences,” Endeavor president Mark Shapiro said in a phone interview Thursday. “Whether it’s sports and our own events like the UFC, all the music festivals and concerts we put on with our artists at William Morris, premium content and sports betting—that’s going to become the way of the world certainly in North America in coming years. We’re in all the power growth areas.”
The capital from the IPO and private placement raised a net $1.8 billion for Endeavor, according to information contained in the prospectus. The funds will support the company’s goals of strategic acquisitions in the future and accelerate a corporate plan to get debt below four times debt-to-equity leverage, according to Shapiro. “Paying down debt is a high priority for us at the moment,” he said.
The 51-year-old executive also called attention to the roster of investors buying Endeavor shares during the IPO and private placement. Among new shareholders are one-time UFC owners Frank and Lorenzo Fertitta, who sold UFC to the Endeavor-led group in 2016, as well as tech billionaires Larry Ellison and Michael Dell. Funds, including Dragoneer Investment Group and Mudabala, a sovereign investment fund of the United Arab Emirates, also invested. How much those investors purchased isn’t yet disclosed. Generally speaking any investor that acquires more than 5% of the company has to report it in a regulatory filing due next week.
Also joining the roster of shareholders is Elon Musk, the multibillionaire founder of Tesla. He, along with whiskey entrepreneur Fawn Weaver, joined Endeavor’s board of directors with the IPO. Neither owns shares in the company yet, according to initial paperwork filed Thursday with the SEC. Silver Lake is the largest shareholder of now-public Endeavor, with 39% of the equity and a majority of the voting power, through ownership of special super-voting shares. KKR, another private equity firm that invested in Endeavor, sold $437 million shares in the private placement process. It now owns about 4.7% of the company.
Endeavor initially filed for an IPO in 2019, but had to suspend the stock sale due to poor stock market conditions. Sportico was first to report that Endeavor had revived the process and would buy the balance of UFC it didn’t already own. Analyst reaction to the debut was muted, probably because Endeavor enlisted 21 banks to help underwrite its IPO. Investment banks are restricted from issuing research on companies they help bring to market for two months. Underwriters also have a 30-day option to purchase an additional 3.2 million shares as part of the IPO. While the 8% two-day return suggests the price was basically on the mark, it is below the average IPO’s early gains: Over the past 40 years, the average public offering gained more than 18% its first day of trading, according to data compiled by Jay Ritter at the University of Florida business school.
The newly public company generated $3.5 billion in revenue last year through three business arms. Its sports properties include now full ownership of UFC, the Professional Bull Riders and Euroleague, a pro basketball league. Accounting for about 43% of sales, Endeavor’s largest business segment—live events, experiences and rights—includes a majority ownership of On Location, a live event business founded and partly owned by the NFL. Endeavor’s talent representation arm rounds out the company, and includes athlete agency IMG and Hollywood talent firm William Morris.
Sports in particular are a central part of Endeavor’s strategy looking ahead. “Sports has shown that it is Teflon,” added Shaprio. “It is in demand no matter where it’s played or what platform it’s on. Bringing the rest of the UFC gives us great potential to maximize all growth levers, now completely in our control, and also gives us firepower to make investments to accelerate UFC’s growth.”