Despite numerous bankruptcies and lawsuits, Rokit has proven adept at getting major sports and entertainment brands to take its money. Backed by billionaire tequila and haircare mogul John Paul DeJoria, the company signed eight-figure sponsorships with NBA, NFL and F1 teams—before it prematurely stopped paying all of them.
But attracting outside capital had been significantly more difficult, if nearly impossible, for the mobile phone and liquor company. That’s why it came as a particular surprise to a number of the company’s own employees when Rokit finally landed an investor in early 2019: Hollywood eminence Endeavor.
Ari Emanuel’s company signed two agreements with Rokit, which at the time was developing a 3D phone to sell alongside its languishing mobile service. In the first deal, Endeavor agreed to give Rokit $2 million in exchange for 66,667 shares of Rokit World Ltd. at a $3 billion valuation. To some of Rokit’s own insiders, this figure was beyond ludicrous, and Rokit’s staff size and product track record had given little public indiciation it was the next tech unicorn.
Still, the investment seemed to carry little risk for Endeavor because in their second deal, signed around the same time, Rokit agreed to pay Endeavor up to $4.5 million over two years to facilitate content connections for its phone platform. That representation agreement, a copy of which was viewed by Sportico, also included commissions for any content rights that Endeavor helped Rokit acquire.
In effect, Endeavor’s $2 million investment would be returned to it two-fold within the following two years. Sources familiar with the arrangement say Rokit ultimately paid about $1 million, less than the money owed in the first year, before the checks stopped coming—a common theme with the company. Endeavor has taken no legal action to recoup the rest of the money it was owed.
In a statement to Sportico, Endeavor president Mark Shapiro said his company based its investment on four financial models Rokit had presented.
After Rokit ceased paying on the representation agreement, “it became clear they had misrepresented their business, so we put a halt to any further dealings and stopped returning their calls,” Shapiro’s statement said.
Questions sent last week to Rokit CEO Jonathan Kendrick and the company’s PR department drew a response from Alex Merino, an attorney representing Kendrick, who declined to comment.
Why Endeavor would want to invest in Rokit—and endorse such a high valuation of the company—mystified a number of Rokit’s own employees, according to sources who spoke to Sportico on the condition they not be identified. Though the company had yet to default en masse on its most prominent sports sponsorships, or barnstorm the U.S. bankruptcy courts, there were warning signs.
The previous year, Rok Mobile was sued by several entertainment companies, including Sony and Warner Music, for failing to make good on music licensing agreements related to Rokit’s mobile subscription service. (A New York State judge eventually ruled against Rok Mobile.)
Then, in late 2018, Rokit had a falling out with another Hollywood power broker, director James Cameron, whose Human Health Organization (H20) had previously entered into a partnership with Rok Mobile to produce a low-radiation mobile phone that employed NASA-patented technology. According to sources, that arrangement fell apart after James Cameron’s brother, John, who was positioned to lead the joint venture along with Kendrick, was subsequently pushed out. James Cameron, who is represented by CAA, previously declined to comment.
Rok Mobile filed for Chapter 7 in 2021, becoming the first of six Rokit-affiliated entities that have declared bankruptcy over the last 18 months. In creditors meetings this year, the bankruptcy trustees have repeatedly pressed Kendrick with questions about how the money has flowed through the Rokit’s complex web of over 50 entities, which are based in the U.S., Ireland and the United Kingdom. (Kendrick is a British citizen who has lived in the U.S. for much of the past decade.)
Rokit World Ltd., the signatory to Endeavor’s investment deal, is an Irish-based holding company for Rokit’s mobile technology pursuits. In 2019, it made its annual financial disclosure under the UK and Irish code reserved for companies with less than 50 employees and annual revenue below £10.2 million, which equaled $13.5 million at the end of 2019.
If the company’s revenue was at the absolute top of that range, it would make the revenue multiple on Endeavor’s investment 222 times. Rokit World Ltd.’s unaudited financial statements claim an operating loss in 2019 of about $1.2 million (£939,000), with more than $100 million owed to its two founders, DeJoria and Kendrick.
The party to the representation agreement with Endeavor was an entity called Rok Content Inc., which, according to public records, was incorporated as a limited liability company in Delaware in December 2018. Though ostensibly based in California, there are no available filings with the California secretary of state’s office showing that it has operated as a business in that state. It has been a common practice of Rokit to create new subsidiaries for handling individual business deals or pursuits, sources say.
The two Endeavor deals came around the time that Rokit was running a formal process for raising outside capital, according to multiple people familiar with the process. Those conversations yielded no other investors, the people said. Filings with the Companies Registration Office in Ireland detail the Endeavor investment and no others.
It was also a tumultuous time for Endeavor, which was borne of a 2013 merger between global talent agency WME and sports and entertainment company IMG. Following years of rumors about Endeavor going public, the merged entity formally began that process in May 2019, shortly after the Rokit deals were signed.
On the day before it was set to begin trading in September of 2019, Endeavor lowered its indicated price range, then abandoned the IPO altogether, citing weak demand from investors. It later relaunched the effort and underwent a successful IPO in April 2021, which initially valued the company (NYSE: EDR) at $10.3 billion.
Endeavor reported $4.6 billion in revenue in 2019, making the revenue owed from the Rokit partnership—$1.5 million in year one, $3 million in year two—insignificant to the company’s bottom line. Endeavor also frequently invests in companies, with well-known successes (UFC, Aviation American Gin) often overshadowing the inevitable misses (Rokit).
The $3 billion valuation, however, hints at either cursory due diligence or a lack of interest in the actual value of the shares the company was receiving. Endeavor did not respond to a question about how often its investments come with reciprocal agreements with other companies that would return all if not more of the amount it paid.
The Rokit investment term sheet and the representation agreement were both signed by Rebecca Sanhueza, currently Endeavor’s executive vice president for content strategy and development, who previously served as deputy general counsel for IMG/Endeavor Content. However, according to sources and documents, Emanuel was actively involved in the negotiations at the start. As with other Rokit partners, sources say, DeJoria’s role as its co-founder and financial backer was its biggest validating factor in Endeavor’s eyes.
It is unclear to what extent Rokit tried to leverage the Endeavor partnership in its efforts to land other deals. Though it has liberally publicized its past business dealings, Sportico could find no public announcement for what constitutes one of the biggest—if not the biggest—capital contributions to Rokit’s coffers from someone other than its founders.
This is not the first time that Kendrick and DeJoria’s company had claimed a billion-dollar-plus valuation. A predecessor to Rokit, Rok Entertainment Group, went public in 2007 in a reverse merger that put a $1.1 billion price tag on that entity. But in 2012, the Securities and Exchange Commission stripped the company’s registration after it had failed to file periodic reports over the course of the previous four years.
Brendan Coffey contributed to this report.
