Endeavor, the parent of William Morris, is seeking an IPO again, even after COVID disrupted its key businesses.

Endeavor Group Holdings Inc., the Los Angeles-based entertainment powerhouse and owner of the William Morris agency, the sports and modeling agency IMG and the UFC mixed martial arts team, is making a second attempt to go public after File filing with the Securities and Exchange Commission this week. A previous effort to complete an initial public offering was canceled in October 2019, after rejection from investors who were put off by their complicated finances at a time when other deals were failing.

The timing is also unusual for this second offering, given that the company was hit hard during the pandemic, which halted live events and television and movie production – the companies Endeavor relies on for money. “While we believe that the long-term value of premium intellectual property, content, and experiences is enduring, the short-term impact on our business as a result of COVID-19 has been significant,” the company acknowledges in its presentation documents. Endeavor EDR, + 4.98% is now betting heavily on the future of the UFC and intends to use the proceeds from the deal and a $ 1.7 billion private placement with private equity firms to acquire the 49.9% stake in UFC that still remains. does not have. That stake was acquired by Silver Lake Partners and KKR KKR, + 3.07% when Endeavor bought a 50.1% stake in UFC in 2016. If it fails to raise that sum and it is not made public, that deal will not go through, the company it says on its leaflet.

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Endeavor mentions the word broadcast 62 times in this IPO prospectus, up from 42 the last time. ”

The UFC was the first major American sport to resume live events in 2020. In another move that has garnered attention, Tesla Inc. TSLA, -0.93% CEO Elon Musk joins Endeavor’s board. “His name carries a lot of weight with retail investors,” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital, a provider of institutional research and IPO ETFs. Retail investors have contributed to the more than 628% surge in Tesla shares over the past year and the accompanying craze for all electric vehicle companies and their suppliers. “This will be presented as a ‘post-pandemic’ growth story about consumers eager to once again go to live events,” Kennedy said. “That is not to say that they will not also emphasize their digital presence, which is always the most important thing for investors evaluating growth. [and] margins. “In fact, Endeavor mentions broadcasting words 62 times in the offering prospectus, up from 42 last time, he said. A dispute has been resolved with the Writers Guild of America who acted as an outgoing last time. that Endeavor attempted to go public. But the company’s finances appear shaky in the pandemic world. Its net loss widened to $ 625 million in 2020 from $ 530.7 million in 2019, the prospect shows. Revenues were down to $ 3,479 billion out of $ 4,571.0 billion. Endeavor has applied to be listed on the New York Stock Exchange under the ticker symbol “EDR.” There are 22 banks signing the deal, led by Morgan Stanley and Goldman Sachs. Here are five things to know about Endeavor before its IPO: Endeavor is a company with very complex bookkeeping Endeavor’s latest prospect seeks to make its expanding financial reporting more transparent by dividing the ne entertainment in three segments: own sports properties; events, experiences and rights; and representation. As it did in 2019, the company presents that structure as one that is designed to help William Morris and IMG clients seize opportunities in an increasingly consumer-friendly world. “The 2020 events reminded us of the enduring value of intellectual property and premium content, while reinforcing the strength of our position within the sports and entertainment ecosystem,” Chief Executive Officer Ari Emanuel wrote in a letter included in the prospectus. . But the company’s accounting remains highly complex and includes many discontinued operations, write-offs, depreciation of owned franchises, and revalued assets. The company has more than 6,400 employees working in 28 countries. It also has huge upfront costs in acquiring content rights that may ultimately not resonate with consumers, whose tastes change all the time, the company says on its risk factors. For example, as of December 31, the company committed to spend about $ 2.2 billion in guaranteed payments for media, events or other rights of representation and similar expenses, “regardless of our ability to benefit from these rights.” It continues: “Specifically, our operating results have been negatively affected in the years ended December 31. [in] 2020 and 2019 due to costs associated with acquired media rights for major football events in excess of revenue, which will continue to negatively affect our results of operations during the term of some of these contracts, which will expire sooner or later. 2026. “Finally, the company is planning an internal reorganization ahead of the deal through a series of transactions that will create the following org chart:

Source: Endeavor filing with the SEC

Endeavor’s largest listed asset is $ 4 billion in goodwill Endeavor’s largest asset on its balance sheet is $ 4.1 billion in recorded goodwill for 2020, a reflection of its highly acquisitive strategy. “For every deal, they pay a premium over fair market value, and it is very subjective to decide if they are overpaying,” said Francine McKenna, an accounting expert and adjunct professor of international business at American University. (McKenna is also a former MarketWatch reporter.) “That makes them very vulnerable to deterioration if there is a deterioration of the brand, or if an acquisition is not what they thought it would be.” The company’s own auditors list the “significant judgments made by management” in estimating the fair value of goodwill as one they should focus on: “Performing audit procedures to evaluate the reasonableness of management’s judgments regarding the business and the valuation assumptions used in the valuation model, particularly the forecasting of future revenue growth rates and profit margins and the selection of the discount rate, required a high degree of auditor judgment and a greater degree of effort , including the need to involve our fair value specialists. ”Endeavor’s debt has grown since the last When it attempted to go public, Endeavor remains highly leveraged, with long-term debt of $ 5.9 billion at the end. of 2020, compared to $ 4.5 billion in the prior year. Interest expense was $ 284.6 million in 2020, more than $ 270.9 million recorded in 2019. Operating expenses of $ 3.632 billion exceeded the 2020 revenue number of $ 3.479 billion, and the company’s operating loss reached $ 153.2 million. That was less than the $ 210.5 million operating loss recorded in 2019, but wider than the 2018 operating loss of $ 107.4 million. “But that doesn’t stop Endeavor from consistently using non-GAAP metrics like adjusted net income and Adjusted EBITDA to turn losses into reported earnings, ”McKenna said. The company says its Adjusted EBITDA, or interesting earnings before taxes, depreciation and amortization, reached $ 585.5 million in 2020 after $ 773.5 million in 2019. The company defines your adjusted EBITDA, an already adjusted number, excluding the following: “discontinued operations, income taxes, net interest expense, depreciation and amortization, share-based compensation, merger costs, acquisition and earnings, certain legal costs, restructuring , severance and impairment charges, certain non-cash fair value adjustments, certain capital gains, related costs with canceled events recognized in excess of insurance recoveries, and other expenses related to COVID-19 and certain other elements identified as affecting comparability, when applicable ”. Shareholders will have very little say in running the company. As it did in 2019, Endeavor plans to list more than one class of shares, this time that means five classes, up from four classes last time. Endeavor will have Class A, Class B, Class C, Class X and Class Y shares, each with different voting rights. Class A and Class X shares will have one vote per share, while Class Y shares will have 20 votes per share. Class B and Class C shares will not have voting rights. Emanuel and CEO Patrick Whitesell and their affiliates, along with Silver Lake affiliates, will hold a majority of the Class Y and Class X shares after the offering, guaranteeing their control of the company. Your interests may not coincide with those of other shareholders. “As a result, they will be able to control any action that requires general approval from our shareholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger. or sale of practically all of our assets, ”says the prospectus. As a controlled company, Endeavor is exempt from certain corporate governance requirements and can choose not to have a board of directors composed mostly of independents, it can choose not to create a compensation committee, or make sure that the board determines or recommends compensation. And since the company is at a loss, it has no plans or ability to pay dividends in the short term. That means that shareholders will have to depend on the appreciation of the share price to get the return on their investments. Endeavor Says It Accepts Diversity, But It’s Not All There As it did last time, Endeavor says it remains committed to diversity, inclusion and equality. on our platform: content, customers and employees. “However, he only has one woman in his C-suite and an independent director. Kerry Chandler is the company’s director of human resources, while the board of directors includes Fawn Weaver, founder and CEO of Uncle Nehest Inc., a premium American whiskey maker. Weaver, who is African American, is also founder and chairman of the nearest Green Foundation and served as a member of the executive board of Meet Each Need With Dignity and Slavery No More.