In the 30 months since he took Endeavor public in 2021, chief executive Ari Emanuel has not been shy about expressing his frustration about its share price.
Emanuel often touted a “flywheel” effect for the company’s array of assets, which include the largest Hollywood talent agency, a professional bull riders league, a sports betting group and events such as the Frieze Art Fair.
The common threads were global sports, live events and talent representation. But investors seemed unsure how they all fit together, and the stock slid 35 per cent after its IPO.
“I just think this takes a little bit of time for everybody to understand all the pieces,” Emanuel told an investment conference this spring. “Hopefully people will get around to it sooner rather than later.”
Last week, Emanuel signalled that he was tired of waiting. On Wednesday Endeavor announced it had launched a review of “strategic alternatives”. Its controlling shareholder, the private equity firm Silver Lake, said soon afterwards that it was considering a proposal to take the company private. The stock surged, ending the week up nearly 28 per cent.
Endeavor had already combined its World Wrestling Entertainment and Ultimate Fighting Championship divisions in September into TKO, a new New York-listed company. The hope was that this would help investors focus more clearly on the value of Endeavor’s other assets, but the stock plumbed new lows in recent weeks.
“There’s been some frustration from the existing shareholder base who have owned Endeavor since the IPO,” said Stephen Glagola, an analyst at TD Cowen. “There was a sense that the TKO transaction was going to be a catalyst. But the stock still went down.”
Perhaps just as frustrating for Emanuel was the acquisition in September of his longtime talent agency rival, CAA, by Artémis, the family holding company of French billionaire François-Henri Pinault.
The roughly $7bn enterprise value on that deal — a multiple of about 13 times CAA’s earnings before interest, tax, depreciation and amortisation in its latest financial year — represented a considerable premium to the valuation of Endeavor’s own talent agency, WME Group, and its other businesses.
Excluding its 51 per cent stake in TKO, Endeavor’s remaining assets were trading at an enterprise multiple of 4.1 times 2024 ebitda, according to Citi.
“That is a remarkably low multiple for attractive, highly differentiated and well-run assets,” Citi analysts wrote this week, adding that they valued Endeavor at $30 per share. The company’s stock ended the week at $22.85.
United Talent Agency, the third-largest in Hollywood, also earned a richer valuation multiple than Endeavor, at nearly 15 times ebitda, when it received an investment from EQT Private Equity last year.
Emanuel, who began as an agent and still manages a handful of star clients, publicly complained about the discounted value of WME to its peers at the Screentime conference in mid-October, where he also criticised CAA and its chief executive, Bryan Lourd.
He cited a recent lawsuit by actress Julia Ormond alleging that two senior CAA agents had warned her not to speak out about abuse by Harvey Weinstein, the disgraced Hollywood producer. CAA has said Ormond’s claims are “baseless, and the agency will vigorously refute them in court”, adding that it takes allegations of assault and abuse seriously.
Emanuel told the October 11 event that he had a “bigger agency” than CAA, adding “we’re worth more and have more morals”.
Lourd shot back the next day, calling Emanuel “incredibly performative, erratic and . . . self-serving” and questioning how “he could hold himself out as morally superior to anyone”.
The public clash between the two superagents comes as their agencies are suffering following nearly six months of strikes that have brought Hollywood to a standstill. Emanuel recently said Endeavor is losing $25mn a month because of the strikes.
The Writers Guild has reached a deal with the group representing studios and streamers, but the Screen Actors Guild remains on strike. Negotiations fell apart on October 10 after the actors demanded a share of streaming subscriber revenue — which Netflix co-chief executive Ted Sarandos dismissed as an unacceptable “levy”.
The two sides have resumed discussions and there is hope for an agreement soon, but tempers are flaring across Hollywood. Israel’s response to the Hamas attack has become another flashpoint — leading to troubles for CAA just weeks after the Pinault deal closed.
CAA agent Maha Dakhil — who represents Reese Witherspoon and Tom Cruise, among other A-listers — stepped aside from her role as co-chief of the motion pictures department after reposting an Instagram story about Israel’s response to the Hamas attacks with a reference to ‘genocide’.
The post has been removed and Dakhil issued an apology and resigned from CAA’s internal agency board. But Aaron Sorkin, the creator of The West Wing and screenwriter of The Social Network, left the agency and returned to WME following the incident.
CAA and Endeavor declined to comment.
For Emanuel, Endeavor and its employees, the coming months may prove to be marked by uncertainty. Silver Lake, with about 71 per cent of Endeavor’s voting power, says it is examining ways to take the company private, and is not interested in entertaining bids for its assets. For its part, Endeavor says it will not consider the sale of its 51 per cent interest in TKO.
Glagola of TD Cowen said he viewed Endeavor as a “conglomerate”, which has hindered investors’ ability to recognise any synergies that exist between the different businesses. For this reason, Silver Lake may ultimately decide to sell some of the company’s assets, he said.
“If Silver Lake is going to take this private, my assumption would be that they’re going to probably spin out some of these businesses to create value,” he added.
