Analyst warns of debt in upcoming Endeavor IPO, highlights UFC as an unpredictable asset

Endeavor, parent company to the world’s largest MMA organization, filed for an initial public offering (IPO) back in May of 2019. For fans of…

By: Zane Simon | 4 years ago
Analyst warns of debt in upcoming Endeavor IPO, highlights UFC as an unpredictable asset
Bloody Elbow 2.0 | Anton Tabuena

Endeavor, parent company to the world’s largest MMA organization, filed for an initial public offering (IPO) back in May of 2019. For fans of the UFC, that may mean the chance to own their own little piece of the Octagon.

However, according to Wall Street Analyst Todd Juenger, while the UFC may be one of the entertainment companies more promising acquisitions of the last few years, Endeavor’s IPO comes with a lot of risk to investors. In a recently released report from Bernstein Research, Juenger notes that the company carries “an extraordinarily high amount of debt”—as much as 9.5 times their earnings before interest, taxes, depreciation and amortization (EBITDA).

“Current investors must surely be uncomfortable operating a volatile business under such a large debt load,” Juenger writes. “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.”

When it comes to the UFC, Juenger was more positive—estimating that the promotion produced $650 million in revenue in 2018 and $240 million in EBITDA. He added that “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,” and that “The opportunity to own a stake in a dominant league in a growing sport with global potential doesn’t come along every day.”

But, his tone around the UFC carried its own notes of caution as well…

“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 (the WGA is currently in a major dispute with all talent agencies over packaging and affiliated production companies), and risk of agents leaving the firm (just like Endeavor’s founder did when he left ICM in 1995).”

“Conor McGregor is a great example,” says Juenger. “But one of his antics injured innocent bystanders in 2017 and another one led to his arrest on felony robbery charges.”

Eventually, he warned that “shareholders will need to be willing to accept an extraordinarily high amount of debt and very tight interest coverage,” and that the company has a “questionable ability to de-lever organically, depending on one’s confidence in revenue growth and operating leverage.”

All of which could lead for interesting times for MMA fans in the near future. If Endeavor’s IPO doesn’t produce as planned, who knows what the future could hold for the entertainment company, or for the UFC as a result.

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About the author
Zane Simon
Zane Simon

Zane Simon is a senior editor, writer, and podcaster for Bloody Elbow. He has worked with the website since 2013, taking on a wide variety of roles. A lifelong combat sports fan, Zane has trained off & on in both boxing and Muay Thai. He currently hosts the long-running MMA Vivisection podcast, which he took over from Nate Wilcox & Dallas Winston in 2015, as well as the 6th Round podcast, started in 2014. Zane is also responsible for developing and maintaining the ‘List of current UFC fighters’ on Bloody Elbow, a resource he originally developed for Wikipedia in 2010.

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