S-1/A 1 d811550ds1a.htm AMENDMENT NO. 6 TO S-1 Amendment No. 6 to S-1
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As filed with the Securities and Exchange Commission on September 26, 2019.

Registration No. 333-231697

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 6

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Endeavor Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   7900   83-3340169
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

 

9601 Wilshire Boulevard, 3rd Floor

Beverly Hills, CA 90210

(310) 285-9000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Jason Lublin

Chief Financial Officer

9601 Wilshire Boulevard, 3rd Floor

Beverly Hills, CA 90210

(310) 285-9000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

Justin G. Hamill, Esq.

Marc D. Jaffe, Esq.
Ian D. Schuman, Esq.

Benjamin J. Cohen, Esq.

Latham & Watkins LLP

885 Third Avenue
New York, New York 10022
(212) 906-1200

 

Seth Krauss, Esq.

Chief Legal Officer

Joel Karansky, Esq.

Deputy General Counsel and Corporate Secretary

Endeavor Group Holdings, Inc.
11 Madison Avenue
New York, NY 10010
(212) 586-5100

 

Thomas Holden, Esq.

Ropes & Gray LLP

Three Embarcadero Center

San Francisco, California 94111

(415) 315-6300

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:   ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.   ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of

Securities to be Registered

 

Amount

to Be

Registered(1)

 

Proposed

Maximum

Offering Price

per Share(2)

 

Proposed

Maximum
Aggregate

Offering Price(1)(2)

  Amount of
Registration Fee(3)

Class A common stock, par value $0.00001 per share

 

17,250,000

  $27.00   $465,750,000.00   $56,448.90

 

 

(1)

Includes 2,250,000 shares of Class A common stock that may be sold if the option to purchase additional shares of Class A common stock granted by the Registrant named herein to the underwriters is exercised in full.

(2)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)

The Registrant previously paid $86,325.68 in connection with prior filings of this Registration Statement on May 23, 2019 and September 16, 2019.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

 

Subject to Completion. Dated September 26, 2019.

Preliminary Prospectus

 

LOGO

 

 

 

Class A Common Stock    15,000,000 Shares

 

 

This is an initial public offering of shares of Class A common stock of Endeavor Group Holdings, Inc. All of the 15,000,000 shares of Class A common stock being offered are being sold by the Company.

Prior to this offering, there has been no public market for the Class A common stock. It is currently estimated that the initial public offering price per share will be between $26.00 and $27.00.

We currently conduct our business through Endeavor Operating Company and its subsidiaries. Prior to the closing of this offering, we intend to complete an internal reorganization through a series of transactions, which we refer to as the “reorganization transactions.” After the completion of this offering, Endeavor Group Holdings will manage and operate the business and control the strategic decisions and day-to-day operations of Endeavor Operating Company through Endeavor Manager and include the operations of Endeavor Operating Company in our consolidated financial statements.

Following this offering, Endeavor Group Holdings, Inc. will have four classes of authorized common stock: Class A common stock, Class B common stock, Class X common stock and Class Y common stock. The Class A common stock offered hereby and the Class X common stock will have one vote per share. The Class Y common stock will have 20 votes per share. The Class B common stock will be non-voting. Our Chief Executive Officer, Ariel Emanuel, and our Executive Chairman, Patrick Whitesell, and their affiliates, together with affiliates of Silver Lake Partners will hold a majority of our issued and outstanding Class Y common stock, Class X common stock and, in the case of affiliates of Silver Lake Partners, Class A common stock after this offering and, as a group, will control more than a majority of the combined voting power of our common stock. As a result, they will be able to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and by-laws and the approval of any merger or sale of substantially all of our assets.

We have applied to list the Class A common stock on the New York Stock Exchange (the “Exchange”) under the symbol “EDR.”

We will be a “controlled company” under the corporate governance rules of the Exchange applicable to listed companies, and therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements thereunder. See “Management—Controlled Company.”

Investing in our Class A common stock involves risks. See “Risk Factors” on page 32 to read about factors you should consider before buying shares of our Class A common stock.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Initial public offering price

   $                    $                

Underwriting discount(1)

   $                    $                

Proceeds, before expenses, to us

   $                    $                

 

(1)

See “Underwriting (Conflicts of Interest).”

To the extent that the underwriters sell more than 15,000,000 shares of Class A common stock, the underwriters have the option to purchase up to an additional 2,250,000 shares from us at the initial public offering price less the underwriting discount within 30 days from the date of this prospectus.

The underwriters expect to deliver the shares against payment in New York, New York on             , 2019.

 

 

 

Goldman Sachs & Co. LLC   KKR   J.P. Morgan   Morgan Stanley   Deutsche Bank Securities

 

Barclays    Citigroup    Credit Suisse    RBC Capital Markets    UBS Investment Bank    Evercore ISI    Jefferies    HSBC

 

BTIG    CODE
Advisors
   DBO
Partners
   LionTree    Moelis &
Company
   Sandler O’Neill +
Partners, L.P.
   Academy
Securities
   Ramirez & Co., Inc.    Siebert Cisneros
Shank & Co., L.L.C.
   The Williams Capital
Group, L.P.

Prospectus dated             , 2019.


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TABLE OF CONTENTS

 

     Page  

Letter From Our CEO

     iv  

Prospectus Summary

     1  

Risk Factors

     32  

Forward-Looking Statements

     65  

Organizational Structure

     67  

Use of Proceeds

     81  

Dividend Policy

     82  

Capitalization

     83  

Dilution

     85  

Unaudited Pro Forma Financial Information

     87  

Selected Historical Consolidated Financial Data

     100  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     102  

Business

     138  

Management

     149  

Executive Compensation

     155  

Principal Stockholders

     187  

Certain Relationships and Related Party Transactions

     190  

Description of Capital Stock

     200  

Shares Available for Future Sale

     206  

Material U.S. Federal Income Tax Considerations

     209  

Underwriting (Conflicts of Interest)

     213  

Legal Matters

     219  

Experts

     219  

Where You Can Find More Information

     220  

Index to Consolidated Financial Statements

     F-1  

 

 

Through and including                 , 2019 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give to you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of the date hereof.

 

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INDUSTRY AND MARKET DATA

Industry and market data used throughout this prospectus were obtained through Company research, surveys and studies conducted by third parties and industry and general publications. Certain information contained under the heading “Business” is based on studies, analyses and surveys prepared by Activate, Inc., Billboard, ESP Properties, Eventbrite, IBISWorld, Kagan, Kleiner Perkins, International Licensing Industry Merchandisers’ Association, PricewaterhouseCoopers LLP (“PwC”), S&P Global Market Intelligence, SportBusiness Group, Statista and Technavio. While we are not aware of any misstatements regarding the industry data presented herein, estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Risk Factors” and “Forward-Looking Statements.”

TRADEMARKS

This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

BASIS OF PRESENTATION

Organizational Structure

In connection with the closing of this offering, we will effect what we refer to herein as the “reorganization transactions.” Unless otherwise stated or the context otherwise requires, all information in this prospectus reflects the consummation of the reorganization transactions and this offering. See “Organizational Structure” for a description of the reorganization transactions and a diagram depicting our organizational structure before and after giving effect to the reorganization transactions and this offering.

As used in this prospectus, unless we state otherwise or the context otherwise requires:

 

   

“we,” “us,” “our,” “Endeavor,” the “Company” and similar references refer (a) after giving effect to the reorganization transactions, to Endeavor Group Holdings and its consolidated subsidiaries, and (b) prior to giving effect to the reorganization transactions, to Endeavor Operating Company and its consolidated subsidiaries.

 

   

“Endeavor Group Holdings” refers to Endeavor Group Holdings, Inc., a Delaware corporation and the issuer in this offering.

 

   

“Endeavor Manager” refers to Endeavor Manager, LLC, a Delaware limited liability company and a direct subsidiary of Endeavor Group Holdings following the reorganization transactions.

 

   

“Endeavor Manager Units” refers to the common interest units in Endeavor Manager.

 

   

“Endeavor Operating Company” refers to Endeavor Operating Company, LLC, a Delaware limited liability company and a direct subsidiary of Endeavor Manager’s and indirect subsidiary of ours following the reorganization transactions.

 

   

“Endeavor Operating Company Units” refers to all of the existing equity interests in Endeavor Operating Company (other than the Endeavor Profits Units) that will be reclassified into Endeavor Operating Company’s non-voting common interest units upon the consummation of the reorganization transactions.

 

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“Endeavor Phantom Units” refers to the phantom units outstanding, which, following this offering, and subject to certain conditions and limitations, will entitle the holder to cash equal to the value of a number of Endeavor Manager Units, Endeavor Operating Company Units or Endeavor Profits Units, or of equity settled to the equivalent number of Endeavor Manager Units, Endeavor Operating Company Units or Endeavor Profits Units.

 

   

“Endeavor Profits Units” refers to the profits units of Endeavor Operating Company that will remain outstanding following this offering. Endeavor Profits Units will be economically similar to stock options. Each Endeavor Profits Unit has a per unit hurdle price, which is economically similar to the exercise price of a stock option.

 

   

“Executive Holdcos” refers to Endeavor Executive Holdco, LLC, Endeavor Executive PIU Holdco, LLC and Endeavor Executive II Holdco, LLC, each a management holding company, the equity owners of which include current and former senior officers, employees or other service providers of Endeavor Operating Company, and which will be controlled by Messrs. Emanuel and Whitesell.

 

   

“Management Holdcos” refers to WME Holdco, LLC and certain other management holding companies, the equity owners of which include current and former senior officers, employees or other service providers of Endeavor Operating Company.

We are a holding company and, immediately after the consummation of the reorganization transactions and this offering, our principal asset will be our indirect ownership interests in Endeavor Operating Company.

Presentation of Financial Information

Endeavor Operating Company, LLC is the predecessor of the issuer, Endeavor Group Holdings, Inc., for financial reporting purposes. Endeavor Group Holdings, Inc. will be the audited financial reporting entity following this offering. Accordingly, this prospectus contains the following historical financial statements:

 

   

Endeavor Group Holdings, Inc. Other than the audited balance sheet as of March 31, 2019 and the unaudited balance sheet as of June 30, 2019, the historical financial information of Endeavor Group Holdings, Inc. has not been included in this prospectus as it is a newly incorporated entity, has no business transactions or activities to date other than those incidental to its formation and preparation of this prospectus and registration statement of which this prospectus forms a part. Endeavor Group Holdings, Inc. had no other assets or liabilities during the periods presented in this prospectus.

 

   

Endeavor Operating Company, LLC. As we will have no other interest in any operations other than those of Endeavor Operating Company, LLC and its subsidiaries, the historical consolidated financial information included in this prospectus is that of Endeavor Operating Company, LLC and its subsidiaries.

The unaudited pro forma financial information of Endeavor Group Holdings, Inc. presented in this prospectus has been derived by the application of pro forma adjustments to the historical consolidated financial statements of Endeavor Operating Company, LLC and its subsidiaries included elsewhere in this prospectus. These pro forma adjustments give effect to the reorganization transactions described in “Organizational Structure,” the Preferred Equity Redemption described under “Prospectus Summary—Recent Developments” and other transactions including the consummation of this offering, as if all such transactions had occurred on January 1, 2018, in the case of the unaudited pro forma consolidated statements of operations, and as of June 30, 2019, in the case of the unaudited pro forma consolidated balance sheet. See “Unaudited Pro Forma Financial Information” for a complete description of the adjustments and assumptions underlying the pro forma financial information included in this prospectus.

 

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LOGO

In the early 1990s, I read George Gilder’s Life After Television. It changed the way I thought about content and distribution. That book was a catalyst that led me to leave a large, established talent agency to start a new and nimble one.

Industry leaders said there wasn’t room for this new ‘Endeavor,’ but we were focused on breaking new ground. We saw an opportunity to use disruption to our benefit and build a company and a platform for where the world was headed.

From the start, we knew we had to extend beyond television and become an impact player in the movie business. For that, we brought in my partner, Patrick Whitesell. Eight years later, we merged with the iconic William Morris Agency to diversify further into books, music, theater and non-scripted television. This merger launched a decade of growth for our company marked, in part, by more than 20 acquisitions — headlined by sports, fashion and media giant IMG and mixed martial arts leader UFC. These companies combined to form a platform distinguished not only by its longevity — having collectively withstood over 120 years of disruption — but also its access, scale and global network.

Content is no longer defined solely by the traditional categories our businesses were founded on. Television, movies and live events have been joined by others including podcasts, experiences, social media and multiplayer video games. Wherever you are in the world and whatever way you define content, Endeavor is likely playing a role.

As the demand for content continues growing, developing new distribution channels to complement our clients’ creative needs is essential. We’ve built a series of businesses across streaming, audio, experiences, gaming and education to ensure our clients and Endeavor are well-positioned for whatever the entertainment landscape looks like in the coming decades.

The trust that some of the world’s most influential creators and visionaries have placed in us to help guide their careers is both a privilege and a responsibility. Every decision we’ve made since those early days reflects our commitment to amplify their influence and maximize their economic potential. Our unique platform enables them to connect with each other, and our IP and owned assets, in ways that are far more meaningful than if approached in isolation.

As the entertainment industry moves toward a closed ecosystem model with less transparency, our clients and businesses need more insight, resources and solutions than ever before. We believe being a public company will only further accelerate our ability to look around corners and open up new categories and opportunities for those in the Endeavor network.

As a public company, we’ll continue:

 

   

Navigating the ever-evolving definition of content

   

Cultivating an environment that encourages connections across the platform and a forward-thinking approach to decision-making

   

Aggressively advocating on behalf of those who’ve placed their trust in us

   

Embracing diversity, inclusion and equality across our platform — content, clients and employees

   

Defining success based on long-term growth and innovation, not short-term gains

This company has been a catalyst for culture-defining content for more than a century. We have a great responsibility to carry this mission forward.

We hope you join us as we begin this next chapter.

 

 

LOGO

 

  

 

 

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PROSPECTUS SUMMARY

This summary highlights selected information about us and this offering but does not contain all of the information that you should consider before investing in our Class A common stock. Before making an investment decision, you should read this entire prospectus carefully, including the discussion under the heading “Risk Factors” and the consolidated financial statements and related notes thereto contained elsewhere in this prospectus. This prospectus includes forward looking-statements that involve risks and uncertainties. See “Forward-Looking Statements” for more information.

Our Company

Endeavor is a global entertainment, sports and content company, home to many of the world’s most dynamic and engaging storytellers, brands, live events and experiences. We create value for our clients – talent, brands and owners of intellectual property (“IP”) – and our owned assets through our integrated capabilities of talent representation, content development, content distribution and sales, event management, marketing and licensing, and direct-to-consumer offerings. We leverage these capabilities to generate revenue in a variety of ways, including media rights sales, sponsorships, subscriptions, license fees, ticket sales, profit participations, profit sharing, pay-per-view programming, commissions and strategic consulting fees, data streaming fees and tuition. Our diverse client base and iconic owned assets combined with our integrated capabilities and flexible business model form a platform that we believe not only amplifies economic potential for our clients, but also allows us to generate revenue in new ways and to maximize revenue from existing relationships and assets across our various businesses.

We believe our platform is highly adaptable to the ever-changing entertainment, sports and content ecosystem and well positioned for continued growth as audiences increasingly seek premium forms of content (e.g., television shows, films, documentaries, video games, podcasts, education, live events and experiences). We are responsive to the growing demand for this content and agnostic to both how that demand is fulfilled and where that content is consumed. Capitalizing on our unique vantage point at the center of this ecosystem, we have broadened our capabilities and created a robust portfolio of owned assets. Beginning with the formation of the original Endeavor talent agency in 1995, our merger with the venerable William Morris Agency to form WME in 2009, and the acquisition of media, sports and fashion leader IMG in 2014, followed by a series of organic growth initiatives, digital investments, strategic partnerships, joint ventures and acquisitions, most notably the Ultimate Fighting Championship (“UFC”) in 2016, we have built a platform that we believe is incredibly difficult to replicate by any other company.

Amidst both industry shifts and our own evolution, access has remained at Endeavor’s core. Once defined by access to talent (e.g., actors, musicians, models, athletes and writers), we have broadened this access to include blue-chip brands (e.g., consumer product companies, sports federations and properties, global broadcasters and digital companies), IP (e.g., television shows, films, books, podcasts and video games) and owned assets (e.g., UFC, Professional Bull Riders (“PBR”), the Miami Open and Frieze), reaching diverse audiences across key media verticals globally. We have also extended our capabilities to amplify and complement our clients’ businesses, helping them reach new audiences and identify new opportunities for growth.

We currently deliver our integrated capabilities across our Entertainment & Sports, Representation and Endeavor X segments, as described in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Business Overview.” Our business has delivered consistent growth and strong financial performance. For the year ended December 31, 2018, we generated $3,613.5 million in revenue, net income of $231.3 million, Adjusted Net Income of $100.1 million and Adjusted EBITDA of $551.1 million. For a discussion of Adjusted Net Income and Adjusted EBITDA and reconciliations to the most closely



 

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comparable GAAP measures, see “Prospectus Summary—Summary Historical and Pro Forma Consolidated Financial and Other Data.”

Our Content Platform

Endeavor’s platform offers a comprehensive solution for our diverse array of clients and owned assets to expand their presence across entertainment, sports and the entire content ecosystem by leveraging our integrated capabilities. We have demonstrated the ability to generate growth, identify complementary opportunities and open up new categories of business. Our platform offers breadth and depth of access that both retains and continually attracts new creative talent and opportunities. We believe this creates a powerful network that when combined with our integrated capabilities and flexible business model not only amplifies economic potential for our clients, but also allows us to generate revenue in new ways and to maximize revenue from existing relationships and assets across our various businesses.

OUR INTEGRATED CAPABILITIES

 

 

LOGO

Talent Representation

Since 1898, we have represented some of the world’s greatest talent, including entertainers, content creators, legendary athletes, sports institutions and style icons. In 2018, for example, we represented more Academy Award and Grammy winners than any other talent agency, as well as some of television’s most prolific creators, arranged various elements of more than 300 television series that premiered across broadcast, cable and streaming channels, represented over 60% of headliners of the major music festivals in the U.S., and managed seven of the 10 highest paid models according to Forbes. We continue to be a primary provider of content to broadcast and cable networks (accounting, for example, for half of the new series ordered by broadcast networks in 2018 and half of HBO’s current original programming) and have also become one of the largest providers of



 

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content to the streaming video-on-demand ecosystem. We are dedicated to helping our more than 6,000 clients build their brands, maintain creative control of their destinies, and diversify and grow their businesses through our platform, providing them opportunities to increase their monetization potential and amplify their reach.

Development

Our content capabilities range from concept development and financing to production, marketing and sales, on behalf of hundreds of creators, sports federations, events and other brands, as well as our owned assets. We provide a full range of entertainment content development services for creators of premium television properties, documentaries, feature films and podcasts seeking greater ownership and creative freedom as they navigate the increasingly consolidated media landscape. We have financed and/or sold more than 100 shows and films through Endeavor Content, including “The Night Manager,” “La La Land” and “Killing Eve.” Through our state-of-the-art studios, we produce tens of thousands of hours of sports programming annually including live competition and editorial video content for leading sports properties, such as the English Premier League, Wimbledon, the Ryder Cup and Serie A, as well as for our owned assets including UFC and PBR. We also produce content for our owned 24/7 sports channels – Sport 24, the first-ever live sports channel for the airline and cruise industries, and EDGEsport, a premium action sports channel – and for a number of other 24/7 sports channels, including the Premier League Content Service for international broadcasters, which includes live matches and regular editorial programming.

Distribution and Sales

We are one of the largest independent global distributors of sports programming, and possess deep relationships with a wide variety of broadcasters and media partners around the world. We sell media rights globally in over 160 countries on behalf of more than 150 clients such as the International Olympic Committee (“IOC”), National Football League (“NFL”), National Hockey League (“NHL”) and Premier League, as well as our owned assets including UFC, PBR and Miss Universe. We also work with more than 200 leading sportsbook brands worldwide to deliver live streaming video and data feeds for more than 45,000 sports events annually, as well as on-demand virtual sports products. This infrastructure also powers the global sale of premium television properties, documentaries and feature films.

Event Management

We own and/or manage more than 700 events annually around the globe, including sporting events covering 20 sports across 25 countries, international fashion weeks, art fairs and music, culinary and lifestyle festivals. We continue to expand our existing owned assets such as UFC, PBR, Frieze and Winter Wonderland, domestically and into new markets, including China and Russia. In addition, we develop new events and create festival environments inclusive of culinary, music and esports around our existing properties and events like UFC (International Fight Week), PBR (Helldorado Days) and the Miami Open.

Marketing and Licensing

We are an agency of record for global blue-chip brands that collectively spend over $60 billion in worldwide advertising annually, including Anheuser-Busch InBev and Visa. We represent brands across licensing, marketing, advertising, digital, public relations, analytics and experiential. Our integrated set of services has grown to include branding and marketing leaders like 160over90 and experiential marketing firms such as IMG Live and Fusion Marketing. Beyond our work directly for brands, we help drive sponsorship, licensing and endorsement deals on behalf of talent, IP and owned assets across our platform, leading us to be ranked the No. 1 licensing agency according to License Global magazine in 2019.



 

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Direct-to-Consumer

Through the relationships and access generated by our platform, we seek opportunities to directly engage with consumers across a range of mediums including digital video, audio, experiences and education. Rooted in our acquisition of NeuLion in 2018, subsequently rebranded as Endeavor Streaming, we are able to provide our clients, including the NFL, NBA and WWE, as well as our owned assets such as UFC and PBR with streaming video solutions (e.g., FIGHT PASS and PBR RidePass). Through Endeavor Audio, we have the ability to develop and distribute podcasts. We are also curating one-of-a-kind VIP experiences for corporate clients and consumers through Endeavor Experiences, with access ranging from backstage moments at concerts to cooking demos with top chefs. In the education and training space, we operate IMG Academy and the UFC Performance Institute, both of which offer specialized training to athletes. We are currently exploring a variety of other direct-to-consumer opportunities as we continue to expand our suite of offerings.

Our Competitive Strengths

Scaled Platform at the Center of the Entertainment, Sports and Content Ecosystem. We believe our platform is distinguished by its longevity, access, scale and global network. We trace our roots back to the establishment of the William Morris Agency in 1898 and IMG in 1960. We represent more than 6,000 clients, conduct business in over 160 countries and manage in excess of 700 events annually. We believe our expertise and the breadth and scale of our capabilities allow us to be responsive to the growing demand for premium forms of content and adaptable in identifying revenue-generating opportunities for our clients and owned assets, which power our platform. The growth in our client base and owned assets, in turn, enhances each of our capabilities, further reinforcing our platform.

Flexible and Varied Revenue Models. We apply the appropriate model to each potential revenue opportunity to maximize that opportunity on behalf of our clients and owned assets. We have the flexibility to generate revenue in a variety of ways, including media rights sales, television packaging fees, profit participations, sponsorships, ticket sales, subscriptions, license fees, data streaming fees, pay-per-view programming, tuition, profit sharing, commissions and strategic consulting fees. We also continue to develop and explore new revenue models.

Scalable Global Footprint. Endeavor’s broad presence currently includes approximately 7,000 employees across more than 20 countries. We augment our global reach through relationships with strategic local partners around the world. For example, we formed a new partnership in 2016, Endeavor China, with investment capital from Sequoia Capital China, Tencent and affiliates of FountainVest Partners to expand our presence in China. We leverage our global footprint to expand the reach of our capabilities and enhance our competitive positioning. We have demonstrated our ability to successfully expand our owned and represented events into new markets, including the expansion of UFC to Russia, China and the Middle East.

Acquisition Expertise. Since 2014, we have completed a number of mergers and acquisitions, including, most notably, IMG and UFC. We believe our platform and platform-driven insights allow us to see around the corner, identifying industry trends and related acquisition opportunities. We believe Endeavor is an acquirer of choice for entrepreneurs and businesses attracted to the power of our platform, and as a result, we benefit from the inbound and often proprietary opportunities generated by our relationships and platform. We have a core competency in evaluating these opportunities with a disciplined investment approach, integrating them and realizing synergies.

Well-positioned to Benefit from Growing End Markets. We have a history of consistently embracing disruption and thriving as transformative technologies have emerged, traditional models have evolved and the definition of content has broadened. We believe that, unlike many of our competitors across entertainment and sports, we are well-positioned to respond to the growing demand for all forms of premium content. Our strong positioning in healthy, growing end markets enhances our competitive ability to retain existing and attract new clients and opportunities to our platform.



 

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Entrepreneurial Culture Led by a Visionary, Seasoned Management Team. We encourage and empower our employees to leverage the resources of our platform to pursue new opportunities for our clients and owned assets. We believe this dynamic culture in turn attracts clients and partners who are themselves aspirational and growth oriented. Established by our visionary founders, including our Chief Executive Officer Ariel Emanuel and our Executive Chairman Patrick Whitesell, this entrepreneurial and creative culture is reinforced daily by them, and strengthened by our deep executive leadership team.

Strong Growth and Robust Operating Margins. Since the start of 2015 through the end of 2018, we have grown revenue at a 27.1% compounded annual growth rate (“CAGR”), driven by industry tailwinds, organic reinvestment and strategic acquisitions. Further, our business generated Adjusted EBITDA margin of approximately 15.3% in 2018. We believe our financial profile provides flexibility to continue to execute upon our various growth initiatives. Our model is further supported by the diversification of our business, which we believe helps insulate our revenue and earnings streams from operational and market volatility.

Our Growth Strategies

Leverage Platform Capabilities to Increase Opportunities for Our Clients and Owned Assets. We intend to continue leveraging the breadth of our scaled platform’s capabilities and the depth of our expertise to maximize the economic opportunity for, and grow wallet share on behalf of, our clients and owned assets. Our experience in opening up new lines of business for our clients and owned assets continually adds to our institutional expertise. We believe these successes allow us to both deepen relationships with our existing clients and attract new aspirational and growth oriented clients and partners, strengthening our platform’s network benefits and driving further revenue growth.

Expand Our Content Offerings. Beyond our current growing end markets, we are further expanding our presence in high growth verticals that have thrived as technology has transformed the entertainment, sports and content landscape. We are enhancing our existing direct-to-consumer services (Endeavor Streaming), growing our podcast offering (Endeavor Audio) and developing new VIP experiences for corporate clients and consumers (Endeavor Experiences), and creating a unique education platform. We believe our platform provides us unique insights to continue identifying and investing in emerging high growth verticals.

Expand Global Presence. We have grown globally to now conduct business in more than 160 countries and intend to continue expanding our international presence both organically and inorganically through businesses such as Endeavor China. We envision demand for our clients and owned assets will continue to grow in markets around the world and therefore aim to improve and increase access and activation opportunities across our platform, particularly in certain large media markets such as China and Russia. We believe there is an opportunity to drive operating leverage and expand the presence of many of our events into new geographic locations. For example, in 2019, we expanded Frieze, one of the world’s most influential contemporary art fairs, from New York and London to Los Angeles and Sneaker Con, a premier sneaker show that gathers shoe fanatics around the world, from North America and Europe to mainland China. We believe our existing global sales and distribution infrastructure allows us to efficiently scale our content offerings in new geographies.

Transform Business Mix Toward Ownership of Premium Assets. We intend to continue investing in premium content assets as the market demand for quality content and live experiences continues to grow. We believe we are well positioned to identify and extract the true value potential of under-monetized content by leveraging the breadth and scale of our platform. We have deliberately transformed our business mix, significantly increasing our proportion of Adjusted EBITDA contributed by owned assets to approximately 50%.

Pursue Strategic Mergers and Acquisitions. We have successfully completed a number of strategic acquisitions that have expanded Endeavor’s capabilities, created our portfolio of owned assets and allowed us to deepen our relationships with our clients. We believe our agency-led insights give us a pulse on the market that we leverage to capitalize on key industry trends. We plan to continue to selectively pursue merger and



 

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acquisition opportunities with a disciplined investment approach to further improve our growth trajectory and enhance our platform’s capabilities. We also expect to continue to invest in our acquisition sourcing, evaluation, execution and integration resources.

Our Industry and Market Opportunity

The markets in which we participate are global, large and benefit from robust industry growth trends. Consumers are increasingly more engaged with entertainment and sports content and live experiences.

The global entertainment and media market was an estimated $2.1 trillion in 2018 and is expected to grow at a 4% CAGR through 2023 to $2.6 trillion, according to PwC’s Global Entertainment & Media Outlook 2019-2023 (“E&M Outlook”). We believe we benefit from the growth of all entertainment, sports and media verticals, in particular:

Television and Film Content

According to market research firm Technavio (“Technavio”) and PwC’s E&M Outlook, the global subscription television industry (including over-the-top (“OTT”) services) and the film industry are expected to grow at a blended 4% CAGR from $293 billion in 2017 to $350 billion by 2022. This includes the OTT industry’s expected growth at a 10% CAGR from $36 billion in 2017 to $58 billion by 2022. The global film industry, as illustrated by movie ticket sales, is expected to grow at a 8% CAGR from $46 billion in 2017 to $66 billion by 2022, according to a report by Technavio. Television subscription fees across traditional cable, satellite and OTT distribution channels in aggregate are growing, driving up the value of television and film content. The proliferation of acquirers of content, including broadcast networks, cable networks, satellite providers and OTT providers has increased the competition for high-quality, original programming as well as library content.

Marketing and Licensing

Around the world, marketing and licensing are key strategies for brands to obtain exposure, achieve better recall, communicate themes and drive increased consumer engagement. Globally, in 2018, there was an estimated spend of $66 billion on sponsorships, up from $43 billion in 2008, according to Statista 2019-Worldwide; IEG; 2007 to 2017. As for the overall advertising landscape, Zenith estimated that global advertising spending reached $579 billion in 2018, and will grow at a CAGR of 4% through 2020. According to a survey by the International Licensing Industry Merchandisers’ Association, global retail sales and revenue from licensed goods and services increased to $272 billion in 2017, up 3% since 2016.

Live Events

Consumers are increasingly attending more live events, seeking unique immersive experiences which can be shared on social media. According to Technavio, the total global live ticketing industry (excluding film) was $78 billion in 2017 and is expected to grow at a 6% CAGR to $105 billion by 2022. The music industry represents one of the largest live event markets with global concert ticket sales expected to grow at a 7% CAGR from $19 billion in 2017 to $26 billion by 2022, according to Technavio. According to a 2017 survey conducted by Eventbrite, 78% of Americans attended a live event in the past year, with millennials leading this trend.

Sports

The global sporting events industry is projected to grow from $161 billion in 2018 to $180 billion by 2021 at a 4% CAGR, according to Technavio. The North American sports industry alone is projected to grow from



 

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$71 billion in 2018 to $80 billion by 2022, at a 3% CAGR, according to PwC’s Sports Outlook 2018 (“Sports Outlook”). According to SportBusiness Group, Global Media Report 2018, the global sports media rights industry comprised a $47 billion market in 2017 and is expected to grow to $53 billion by 2021 and we believe distributors will continue to place a premium on live sports content. Additionally, the global sports betting and lotteries industry generated $217 billion in 2018, according to IBISWorld, and we believe the industry will continue to grow with further sports betting legalization in the United States.

Risks Associated with Our Business

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks summarized in the “Risk Factors” section of this prospectus immediately following this prospectus summary, including the risks that:

 

   

changes in public and consumer tastes and preferences and industry trends could reduce demand for our services and content;

 

   

our ability to generate revenue from discretionary and corporate spending on entertainment and sports events is subject to many factors, including many that are beyond our control, such as general macroeconomic conditions;

 

   

our failure to identify, sign and retain clients could adversely affect our business;

 

   

our substantial indebtedness could limit our ability to pursue our growth strategy; and

 

   

we are controlled by Messrs. Emanuel and Whitesell, Executive Holdcos and certain affiliates of Silver Lake Partners, whose interest in our business may be different than an investor in this offering.

Corporate History

The Endeavor Agency, L.L.C. was founded in 1995 by Ariel Emanuel and several partners. In 2009, The Endeavor Agency, L.L.C. merged with the William Morris Agency, LLC (founded in 1898) to form William Morris Endeavor Entertainment, LLC (“WME”), with Ariel Emanuel and Patrick Whitesell becoming WME’s Co-Chief Executive Officers.

In May 2012, affiliates of Silver Lake Partners made a strategic minority investment in WME, the first of several investments by affiliates of Silver Lake Partners in us or our affiliates (e.g., UFC, Learfield IMG College).

In 2014, WME acquired media, sports and fashion leader IMG Worldwide Holdings, Inc. (“IMG”) (founded in 1960) (the “IMG Acquisition”) and formed Endeavor Operating Company, with additional equity capital from, among others, affiliates of Silver Lake Partners.

Since the IMG Acquisition, additional investments have been made in Endeavor by, among others, affiliates of Silver Lake Partners (and now Silver Lake Partners’ equity stake is primarily held in vehicles which began their investment periods in 2014 or later), the Canada Pension Plan Investment Board and GIC Private Limited, Singapore’s sovereign wealth fund. Endeavor has also completed a series of organic growth initiatives, entered into several strategic joint ventures and made a number of additional acquisitions.

In 2016, Endeavor, together with affiliates of Silver Lake Partners and affiliates of Kohlberg Kravis Roberts & Co. L.P. (collectively, “KKR”) and certain other investors, acquired Zuffa Parent, LLC (“UFC Parent”), which owns and operates UFC, the world’s premier professional mixed martial arts (“MMA”)



 

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organization (the “UFC Acquisition”). We have a controlling financial interest over the business and affairs of UFC Parent and have consolidated UFC Parent’s financial results from the date of the UFC Acquisition. We currently own 50.1% of UFC Parent’s common equity.

Additional acquisitions include: Frieze, a leading arts event and media company; PBR, the premier professional bull riding organization; 160over90, a full-service branding and marketing agency; and NeuLion, a video streaming services leader. In addition, we formed Endeavor China, a strategic partnership with Sequoia Capital China, a venture capital and private equity firm, Tencent Holdings Limited, a provider of media, entertainment, internet and mobile services in China, and affiliates of FountainVest Partners, a China-focused private equity firm.

On December 31, 2018, we completed the merger of our IMG College business with Learfield Communications, LLC (“Learfield”), a provider of integrated marketing solutions in college sports, to form Learfield IMG College. In connection with the merger, we sold approximately 13% of the equity interests in Learfield IMG College to affiliates of Silver Lake Partners for $250 million. We received cash proceeds totaling $399.2 million and 36% of the equity interests of Learfield IMG College, which was recognized as an equity method investment having a value equal to $725.1 million as of December 31, 2018. The results of operations of our IMG College business are presented as discontinued operations for all periods prior to its disposal.

On March 29, 2019, our subsidiary, WME Dragon Holdings, LLC, entered into a definitive agreement to sell its 49% interest in Droga5 to an affiliate of Accenture LLP for consideration of $233.0 million, subject to customary adjustments. The sale of our interest in Droga5 closed on April 30, 2019 and, at closing, we received cash consideration of approximately $207 million, which amount is subject to customary (but upward only) post-closing adjustments, including for the release of escrows.

Recent Developments

As part of the UFC Acquisition in 2016, UFC Parent issued $360 million of preferred equity in the form of Class P Units (the “UFC Preferred Units”). The holders of UFC Preferred Units are entitled to a cumulative distribution at an annual rate of 13.0%, payable quarterly in arrears by accumulating and compounding to the liquidation preference (the “preferred return”). After the third, fourth and fifth anniversary of the issuance of the UFC Preferred Units, UFC Parent may elect to redeem any or all of the outstanding UFC Preferred Units at an amount per unit equal to the then current liquidation preference, plus a redemption premium of 105%, 102.5% and 100%, respectively. On September 11, 2019, UFC Parent commenced a redemption of all of the UFC Preferred Units for aggregate consideration of $537.7 million (the “Preferred Equity Redemption”). UFC Parent financed the redemption of the UFC Preferred Units, together with fees and expenses related thereto, with $465 million of incremental first lien term loans under our UFC Credit Facilities (as defined below) and $77.7 million of cash on hand. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Historical Liquidity and Capital Resources—Debt facilities—UFC Credit Facilities and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Historical Liquidity and Capital Resources—Debt facilities— UFC Preferred Units.”

The financing for the incremental first lien term loans under our UFC Credit Facilities and the Preferred Equity Redemption closed on September 18, 2019.



 

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The Reorganization Transactions

“Up-C” Structure

This offering is being conducted through what is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they decide to undertake an initial public offering. The Up-C structure can provide tax benefits and associated cash flow advantages to both the issuer corporation and the existing owners of the partnership or limited liability company in the initial public offering.

We currently conduct our business through Endeavor Operating Company and its subsidiaries. Prior to the closing of this offering, we intend to complete an internal reorganization through a series of transactions, which we refer to as the “reorganization transactions.” After the completion of this offering, Endeavor Group Holdings will manage and operate the business and control the strategic decisions and day-to-day operations of Endeavor Operating Company through Endeavor Manager and include the operations of Endeavor Operating Company in our consolidated financial statements.

Capital and Voting Structure

In connection with the reorganization transactions:

 

   

we will amend and restate our certificate of incorporation and will be authorized to issue four classes of common stock, which we refer to collectively as our “common stock” and which are summarized in the following table:

 

Class of Common Stock

   Votes      Economic Rights  

Class A common stock

     1        Yes  

Class B common stock

     None        Yes  

Class X common stock

     1        None  

Class Y common stock

     20        None  

Voting shares of our common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders. We will issue shares of our Class A common stock to the investors in this offering. No shares of our Class B common stock will be outstanding upon the closing of this offering. We do not intend to list our Class B common stock, Class X common stock or Class Y common stock on any stock exchange;

 

   

Endeavor Manager, a newly formed subsidiary of Endeavor Group Holdings, will become the sole managing member of Endeavor Operating Company, and Endeavor Group Holdings will become the sole managing member of Endeavor Manager;

 

   

Endeavor Manager will issue to the equityholders of certain management holding companies common interest units in Endeavor Manager, which we refer to as “Endeavor Manager Units,” along with paired shares of our Class X common stock, as consideration for the acquisition of Endeavor Operating Company Units held by such management holding companies;

 

   

we will (i) issue to affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake Partners, shares of our Class Y common stock, Class A common stock and rights to receive payments under the tax receivable agreement described below and (ii) issue to affiliates of certain other of our pre-IPO investors shares of our Class A common stock, in each case as consideration for the acquisition of Endeavor Operating Company Units held by such pre-IPO investors;

 

   

all of the existing equity interests in Endeavor Operating Company (other than certain profits units, which will remain outstanding after this offering) will be reclassified into Endeavor Operating Company’s non-voting common interest units, which we refer to as “Endeavor Operating Company Units;”



 

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we will issue to the holders of Endeavor Operating Company Units (other than Endeavor Manager) paired shares of our Class X common stock and, in certain instances, Class Y common stock, in each case equal to the number of Endeavor Operating Company Units held by each of them upon completion of this offering and in exchange for the payment by such holders of the aggregate par value of the Class X common stock and Class Y common stock that is received; and

 

   

Endeavor Profits Units that will remain outstanding following this offering will be economically similar to stock options. Each Endeavor Profits Unit has a per unit hurdle price, which is economically similar to the exercise price of a stock option.

Ownership of Economic Interests

 

   

Upon completion of the reorganization transactions and this offering, and assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and an offering size of $405.0 million, the economic interests in Endeavor Group Holdings owned by investors in this offering and our pre-IPO equityholders will be as follows:

 

     Endeavor Group
Holdings
    Fully Converted     Fully Converted
Diluted
 
     Shares      %     Shares      %     Shares      %  
     (1)            (2)            (3)         

Shareholders of Endeavor Group Holdings

               

Investors in this offering

     15,000,000        12.0     15,000,000        6.4     15,000,000        6.3

Silver Lake Partners and related parties

     52,396,532        42.0     52,396,532        22.3     52,396,532        22.1

Affiliates of our other pre-IPO investors

     57,497,825        46.0     57,497,825        24.4     57,497,825        24.2

Sub-Total

     124,894,357        100.0     124,894,357        53.1     124,894,357        52.6

Members of Endeavor Manager (other than Endeavor Group Holdings)

                  11,138,461        4.7     11,138,461        4.7

Sub-Total

                  11,138,461        4.7     11,138,461        4.7

Members of Endeavor Operating Company (other than Endeavor Manager)

               

Silver Lake Partners and related parties

                  53,573,579        22.8     53,573,579        22.6

Affiliates of our other pre-IPO investors

                  8,198,253        3.5     8,198,253        3.5

Messrs. Emanuel and Whitesell and Executive Holdcos

                  37,388,018        15.9     39,623,393        16.7

Sub-Total

                  99,159,850        42.2     101,395,225        42.7
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     124,894,357        100.0     235,192,668        100.0     237,428,043        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Reflects the number of shares of our Class A common stock then outstanding. If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares owned by investors in this offering, and in the table above, would be 17,250,000.

(2)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at such initial offering price.

(3)

Reflects the number of shares of our Class A common stock (excluding approximately 1,880,946 restricted stock units and 1,617,774 options based on the highpoint of the estimated public offering price range set



 

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  forth on the cover page of this prospectus that we intend to grant to certain directors, employees and other service providers in connection with this offering) that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, assuming (a) that all performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such initial offering price were not exchanged for any shares of our Class A common stock and (b) that all Endeavor Profits Units were exchanged into Endeavor Operating Company Units in respect of their in-the-money value at such initial offering price.

 

   

The economic rights in Endeavor Group Holdings owned by Messrs. Emanuel and Whitesell and Executive Holdcos as members of Endeavor Operating Company as reflected in the table above will vary depending on, among other things, the satisfaction of certain performance-based vesting conditions and the extent to which the Endeavor Profits Units are in the money. The following table summarizes the Endeavor Operating Company Units and Endeavor Profits Units owned by Messrs. Emanuel and Whitesell and Executive Holdcos and their applicable performance-based vesting conditions and hurdle prices:

 

     Weighted Average      Endeavor Operating Company  
     Per Unit      Basic      Fully Converted
Diluted
     Fully Converted
Fully Diluted
 
     Vesting Price      Hurdle Price      Units      Units      Units  
     (1)      (2)      (3)      (4)      (5)  

Endeavor Operating Company Units

     —          —          37,388,018        37,388,018        37,388,018  

Endeavor Operating Company Unit with performance-based vesting conditions

   $ 34.25        —          —          —          391,986  

Endeavor Profits Units

     —        $ 21.20        —          2,235,375        10,398,847  

Endeavor Profits Units with performance-based vesting conditions

   $ 37.30      $ 23.22        —          —          5,488,662  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

           37,388,018        39,623,393        53,667,513  
        

 

 

    

 

 

    

 

 

 

 

(1)

Reflects performance-based vesting conditions based on the achievement of certain equity valuation targets, expressed as a per unit price on a weighted-average basis. For Endeavor Operating Company Units and Endeavor Profits Units with these performance-based vesting conditions, subject to certain exceptions and restrictions, these conditions must be satisfied before these units become exchangeable into cash or shares of our Class A common stock (or, in the case of Endeavor Profits Units, into Endeavor Operating Company Units that would then be exchangeable into cash or shares of our Class A common stock). At the time of this offering, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), none of the performance-based vesting conditions of the 391,986 Endeavor Operating Company Units and 5,488,662 Endeavor Profits Units shown in the table above will have been satisfied (because such initial offering price would be less than the applicable per unit vesting price).

(2)

Reflects distribution thresholds, expressed as a per unit hurdle price on a weighted-average basis (similar to an exercise price for stock options). Subject to certain restrictions, Endeavor Profits Units will be exchangeable by their holders into a number of Endeavor Operating Company Units that will generally be equal to (a) the spread between the per unit value of an Endeavor Operating Company Unit at the time of the exchange and the applicable per unit hurdle price, divided by (b) the per unit value of an Endeavor Operating Company Unit. At the time of this offering, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), (i) the 10,398,847 Endeavor Profits Units shown in the table above would be exchangeable into 2,235,375 Endeavor Operating Company Units and (ii) as described in note (1) above, the 5,488,662



 

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  Endeavor Profits Units with performance-vesting conditions shown in the table above would not be exchangeable into any Endeavor Operating Company Units (because the initial offering price would be less than the applicable per unit vesting price).
(3)

Reflects the number of Endeavor Operating Company Units then outstanding, excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at the time of this offering, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus).

(4)

Reflects the number of Endeavor Operating Company Units that would be outstanding if all Endeavor Profits Units were exchanged into Endeavor Operating Company Units in respect of their in-the-money value, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), and excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at such initial offering price.

(5)

Reflects the number of Endeavor Operating Company Units that would be outstanding if (a) the performance-based vesting conditions of Endeavor Company Units and Endeavor Profits Units with such conditions were satisfied and (b) all Endeavor Profits Units were exchanged into Endeavor Operating Company Units on a one-to-one basis (regardless of their in-the-money value).

 

   

For illustrative purposes only, the following table shows how the number of economic interests in Endeavor Group Holdings would vary at various future trading prices per share of our Class A common stock after the completion of this initial public offering, assuming an offering size of $405.0 million and the reorganization transactions are completed on the basis of an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus):

 

Hypothetical

Price Per Share

of Class A Common Stock

   Endeavor Group
Holdings

Basic
     Fully Converted
Basic
     Fully Converted
Diluted
 
   Shares      Shares      Shares  
     (1)      (2)      (3)  

$20.00

     124,894,357        235,192,668        235,736,161  

$24.00

     124,894,357        235,192,668        236,407,860  

$28.00

     124,894,357        235,192,668        237,719,847  

$32.00

     124,894,357        235,192,668        239,127,294  

$36.00

     124,894,357        235,192,668        240,439,748  

$40.00

     124,894,357        235,192,668        242,775,351  

 

(1)

Reflects the number of shares of our Class A common stock then outstanding.

(2)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A Common stock, excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at such initial offering price.

(3)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, assuming (a) the applicable hypothetical price per share of Class A common stock, (b) that all performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such hypothetical price per share were not exchanged for any shares of our Class A common stock, and (c) that all Endeavor Profits Units then outstanding were exchanged into Endeavor Operating Company Units in respect of their in-the-money value at such hypothetical price per share.



 

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Ownership of Voting Rights.

 

   

Upon completion of the reorganization transactions and this offering, and assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), the combined voting power in Endeavor Group Holdings will be as follows:

 

         If the underwriters do not exercise    
    their option  to purchase additional    
    shares of Class A common stock    
        If the underwriters exercise in full    
    their option  to purchase additional    
    shares of Class A common stock    
 
     Votes     Votes  
             Total                      %                     Total                      %          

Investors in this offering

     15,000,000        0.4     17,250,000        0.5

Silver Lake Partners and related parties

     2,225,372,331        58.9     2,225,372,331        58.8

Affiliates of our other pre-IPO investors

     401,209,929        10.6     401,209,929        10.6

Members of Endeavor Manager (other than Endeavor Group Holdings)

     11,138,461        0.3     11,138,461        0.3

Messrs. Emanuel and Whitesell, Executive Holdcos

     1,127,017,773        29.8     1,127,017,773        29.8
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     3,779,738,494        100.0     3,781,988,494        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

   

Upon completion of the reorganization transactions and this offering, and assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and an offering size of $405.0 million, the voting rights in Endeavor Group Holdings will be owned as follows:

 

     Shares      Votes  
     Class A      Class X      Class Y      Total      %  
     (1)      (2)      (3)                

Shareholders of Endeavor Group Holdings

              

Investors in this offering

     15,000,000        —          —          15,000,000        0.4

Silver Lake Partners and related parties

     52,396,532        —          52,396,532        1,100,327,172        29.1

Affiliates of our other pre-IPO investors

     57,497,825        —          8,864,935        234,796,525        6.2

Sub-Total

     124,894,357        —          61,261,467        1,350,123,697        35.7

Members of Endeavor Manager (other than Endeavor Group Holdings)

     —          11,138,461        —          11,138,461        0.3

Sub-Total

     —          11,138,461        —          11,138,461        0.3

Members of Endeavor Operating Company (other than Endeavor Manager)

              

Silver Lake Partners and related parties

     —          53,573,579        53,573,579        1,125,045,159        29.8

Affiliates of our other pre-IPO investors

     —          8,198,253        7,910,758        166,413,404        4.4

Messrs. Emanuel and Whitesell and
Executive Holdcos

     —          53,667,513        53,667,513        1,127,017,773        29.8

Sub-Total

     —          115,439,345        115,151,850        2,418,476,336        64.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     124,894,357        126,577,806        176,413,317        3,779,738,494        100.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares of Class A common stock owned by investors in this offering, and in the table above, would be 17,250,000.



 

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(2)

Members of Endeavor Manager (other than Endeavor Group Holdings) will receive one share of our Class X common stock for each Endeavor Management Unit owned by them. Members of Endeavor Operating Company (other than Endeavor Manager) will receive one share of our Class X common stock for each Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

(3)

Silver Lake Partners and related parties, affiliates of certain of our other pre-IPO investors, Messrs. Emanuel and Whitesell and Executive Holdcos will receive one share of our Class Y common stock for each share of Class A common stock, Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

At such time that Endeavor Profits Units are exchanged into a number of Endeavor Operating Company Units, the holders exchanging such Endeavor Profits Units will receive a number of shares of our Class X common stock and shares of our Class Y common stock for each Endeavor Operating Company Unit into which such Endeavor Profits Units were so exchanged.



 

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The following diagram depicts our organizational structure following the reorganization transactions, this offering and the application of the net proceeds from this offering (assuming an initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and no exercise of the underwriters’ option to purchase additional shares). For purposes of depicting ownership of voting power in Endeavor Group Holdings, the below diagram takes into account shares of Class X common stock and Class Y common stock held by investors in this offering and our pre-IPO equityholders (including holders of all Endeavor Manager Units and Endeavor Operating Company Units). For purposes of depicting ownership of economic interests in Endeavor Group Holdings, the below diagram does not take into account (a) any performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such initial offering price, and (b) any Endeavor Profits Units. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our organization:

 

 

LOGO

Endeavor Group Holdings is a holding company and, immediately after the consummation of the reorganization transactions and this offering, our principal asset will be our indirect ownership interests in Endeavor Operating Company. The total number of Endeavor Operating Company Units and Endeavor Profits Units indirectly owned by us, the other members of Endeavor Manager and the members of Endeavor Operating Company (other than Endeavor Manager) at any given time will equal the sum of the outstanding shares of our Class A common stock and our Class X common stock.



 

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Exchange Mechanics

Following this offering, the members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units (and paired shares of Class X common stock) in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings. Upon the disposition of the Class A common stock received by members of Endeavor Operating Company from the exchange of their Endeavor Operating Company Units (and corresponding cancelation of paired shares of Class X common stock), or a Triggering Event (as defined below), any shares of Class Y common stock that are paired with such Class A common stock as a result of the redemption or exchange will be cancelled/redeemed for no consideration.

Following this offering, the members of Endeavor Manager (other than Endeavor Group Holdings) will have the right from time to time, subject to certain restrictions, to cause Endeavor Manager to redeem any or all of their vested Endeavor Manager Units (and paired shares of Class X common stock) in exchange for, at our election, either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings.

Proceeds

Based on an assumed initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), we estimate that the net proceeds from this offering will be $361.6 million (or $419.3 million if the underwriters exercise their option to purchase additional shares in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to contribute the net proceeds from this offering to Endeavor Manager in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering. Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units, and such contribution amount will be used by Endeavor Operating Company for the repayment of term loan debt under our 2014 Credit Facilities (as defined below), working capital and general corporate purposes. We may also use a portion of the net proceeds from this offering for acquisitions of complementary businesses or other assets. We estimate that the offering expenses (other than the underwriting discounts) will be approximately $21.2 million. All of such offering expenses will be paid for or otherwise borne by Endeavor Operating Company. See “Use of Proceeds” for further details.

Tax Receivable Agreement

In connection with the reorganization transactions, we will acquire existing equity interests in Endeavor Operating Company held by certain of our pre-IPO investors as described in “Organizational Structure —Reorganization Transactions—Pre-IPO Investors Mergers” in exchange for the issuance of shares of our Class A common stock, Class Y common stock and rights to receive payments under a tax receivable agreement. As a result of these acquisitions, we will succeed to certain tax attributes of certain of our pre-IPO investors and will receive the benefit of tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries. In addition, future redemptions or exchanges of Endeavor Operating Company Units in exchange for shares of our Class A common stock or cash are expected to produce favorable tax attributes that would not be available to us in the absence of such redemptions or exchanges. We intend to enter into a tax receivable agreement with certain of our pre-IPO investors, including certain affiliates of Silver Lake Partners and certain management holding vehicles (or their members) and affiliates of our pre-IPO investors, whom we refer to collectively as the “Post-IPO TRA Holders,” that will provide for the payment by us to the Post-IPO TRA Holders (or their



 

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transferees of Endeavor Operating Company Units or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we realize or are deemed to realize (determined by using assumptions regarding combined state and local income tax rates) as a result of these tax attributes and tax attributes resulting from payments made under the tax receivable agreement. See “Organizational Structure—Tax Receivable Agreement” and “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

Our Principal Equityholders

Following the completion of the reorganization transactions and this offering, Messrs. Emanuel and Whitesell and entities controlled by Messrs. Emanuel and Whitesell, together with certain affiliates of Silver Lake Partners that will be our stockholders upon the completion of this offering (the “Silver Lake Equityholders”), as a group, will control approximately 88.7% of the combined voting power of our outstanding common stock (or 88.6% if the underwriters exercise their option to purchase additional shares in full) based on an assumed initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus). As a result, Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and by-laws and the approval of any merger or sale of substantially all of our assets. Because Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will collectively control, as a group, more than 50% of the combined voting power of our outstanding common stock, we will be a “controlled company” under the corporate governance rules for Exchange- listed companies. Therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements of the Exchange. See “Management—Controlled Company,” “Principal Stockholders” and “Certain Relationships and Related Party Transactions—Stockholders Agreement” for additional information.

Mr. Emanuel has successfully served as our Co-Chief Executive Officer from 2009 to 2017 and as our Chief Executive Officer since 2017, and Mr. Whitesell has successfully served as our Co-Chief Executive Officer from 2009 to 2017 and as our Executive Chairman since 2017. Combined, Messrs. Emanuel and Whitesell have nearly 60 years of experience in the entertainment industry. Each Executive Holdco is managed by an executive committee composed of Messrs. Emanuel and Whitesell.

Silver Lake, an investment firm, is the global leader in technology investing, with over $43 billion in combined assets under management and committed capital and a team of approximately 100 investment and value creation professionals located around the world. Silver Lake devotes its full scope of talent and intellectual capital to the singular mission of investing in the world’s leading technology, technology-enabled and related growth businesses. Applying the strategic insights of an experienced industry participant, the operating skill of a world-class management team, and sophisticated investing and structuring capabilities, Silver Lake leverages the deep knowledge and expertise of a global team based in Silicon Valley, New York, London and Hong Kong. Silver Lake’s large-scale investments arm is Silver Lake Partners.

Corporate Information

We were formed as a Delaware corporation in January 2019. We have no material assets and have not engaged in any business or other activities except in connection with the reorganization transactions and this offering. Our corporate headquarters are located at 9601 Wilshire Boulevard, 3rd Floor, Beverly Hills, CA 90210, and our telephone number is (310) 285-9000. Our website address is www.endeavorco.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus.



 

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The Offering

 

Class A common stock offered by us

15,000,000 shares.

 

Option to purchase additional shares

We have granted the underwriters the right to purchase an additional 2,250,000 shares of Class A common stock from us within 30 days from the date of this prospectus.

 

Class A common stock to be outstanding immediately after this offering

124,894,357 shares (or 127,144,357 shares if the underwriters exercise their option to purchase additional shares in full).

 

  If, immediately after this offering and the application of the net proceeds from this offering, all of the members of Endeavor Operating Company and Endeavor Manager were to elect to have their Endeavor Operating Company Units or Endeavor Manager Units, as applicable, and corresponding shares of Class X common stock, redeemed and we elected to redeem such units in exchange for shares of our Class A common stock, 235,192,668 shares of our Class A common stock would be outstanding (39.0% of which would be owned by non-affiliates of the Company) (or 237,442,668 shares (39.6% of which would be owned by non-affiliates of the Company) if the underwriters exercise their option to purchase additional shares in full).

 

Class B common stock to be outstanding immediately after this offering

None. Shares of our Class B common stock have economic but no voting rights (except as required by applicable law).

 

Class X common stock to be outstanding immediately after this offering

126,577,806 shares. Shares of our Class X common stock have voting but no economic rights (including rights to dividends and distributions upon liquidation) and will be issued in the reorganization transactions to the members of Endeavor Manager (other than Endeavor Group Holdings) in an amount equal to the number of Endeavor Manager Units held by such persons and to other members of Endeavor Operating Company in an amount equal to the number of Endeavor Operating Company Units held by such persons. When a member of Endeavor Manager exercises its right from time to time to cause Endeavor Manager to redeem any or all of its Endeavor Manager Units as described elsewhere in this prospectus, a corresponding number of shares of our Class X common stock held by such member will be simultaneously cancelled. When a holder of Endeavor Operating Company Units exercises its right from time to time to cause Endeavor Operating Company to redeem any or all of its Endeavor Operating Company Units as described elsewhere in this prospectus, a corresponding number of shares of our Class X common stock held by such member will be simultaneously canceled.

 

Class Y common stock to be outstanding immediately after this offering

176,413,317 shares. Shares of our Class Y common stock have voting but not economic rights (including rights to dividends and distributions upon liquidation). We will issue shares of our Class Y common stock to affiliates of certain of our pre-IPO investors, including certain affiliates



 

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of Silver Lake Partners, in consideration for Endeavor Operating Company Units acquired by Endeavor Group Holdings from such pre-IPO investors in the reorganization transactions. We will also issue paired shares of our Class Y common stock to certain other holders of Endeavor Operating Company Units (other than Endeavor Manager), equal to the number of Endeavor Operating Company Units held. See “Organizational Structure.”

 

Voting rights

Each share of our Class A common stock entitles its holder to one vote per share, representing an aggregate of 3.3% of the combined voting power of our outstanding common stock upon the completion of this offering and the application of the net proceeds from this offering (or 3.4% if the underwriters exercise their option to purchase additional shares in full).

 

  Shares of our Class B common stock do not entitle holders to any voting rights (except as required by applicable law).

 

  Each share of our Class X common stock entitles its holder to one vote per share, representing an aggregate of 3.3% of the combined voting power of our outstanding common stock upon the completion of this offering and the application of the net proceeds from this offering (or 3.3% if the underwriters exercise their option to purchase additional shares in full).

 

  Each share of our Class Y common stock entitles its holder to 20 votes per share, representing an aggregate of 93.3% of the combined voting power of our outstanding common stock upon the completion of this offering and the application of the net proceeds from this offering (or 93.3% if the underwriters exercise their option to purchase additional shares in full).

 

  All classes of our common stock with voting rights generally vote together as a single class on all matters submitted to a vote of our stockholders. See “Description of Capital Stock.”

 

Redemption rights

The members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units, (and paired shares of Class X common stock), in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings. Upon the disposition of the Class A common stock received by members of Endeavor Operating Company from the exchange of their Endeavor Operating Company Units (and paired shares of Class X common stock), or a Triggering Event, any paired shares of Class Y common stock will be cancelled/redeemed for no consideration.

 

 

The holders of Endeavor Profits Units will have the right from time to time, subject to certain restrictions, to cause Endeavor Operating Company to exchange their vested Endeavor Profits Units into (1) a number of Endeavor Operating Company Units that will generally be



 

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equal to (a) the product of (X) the number of vested Endeavor Profits Units to be exchanged with a given per unit hurdle price and (Y) then-current spread between the per unit value of an Endeavor Operating Company Unit at the time of the exchange and the per unit hurdle price of such Endeavor Profits Units divided by (b) the per unit value of an Endeavor Operating Company Unit at the time of the exchange and (2) a corresponding number of shares of our Class X common stock and Class Y common stock.

 

  The members of Endeavor Manager (other than Endeavor Group Holdings) will have the right from time to time, subject to certain restrictions, to cause Endeavor Manager to redeem any or all of their vested Endeavor Manager Units (and paired shares of our Class X common stock), in exchange for, at our election, either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings.

 

  Each share of our Class Y common stock will automatically be canceled/redeemed (a) upon any sale or other transfer of (i) the paired Endeavor Operating Company Unit (or the paired Class A common stock in the case that the Endeavor Operating Company Unit and paired share of Class X common stock is redeemed and converted) in the case of affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake Partners, and other holders of Endeavor Operating Company Units (other than Endeavor Manager), and (ii) those paired shares of Class A common stock, in the case of affiliates of certain other pre-IPO investors, in each case subject to certain limited exceptions, such as transfers to certain permitted transferees, or (b) upon the earlier of (i) the date on which neither Messrs. Emanuel nor Whitesell is employed as our Chief Executive Officer or Executive Chairman and (ii) the date on which neither Messrs. Emanuel nor Whitesell own shares of our Class A common stock representing, and/or own securities that if redeemed for shares of our Class A common stock would represent an ownership interest in our Class A common stock representing, at least 25% of the shares of our Class A common stock owned by Messrs. Emanuel and Whitesell (or that would be owned by Messrs. Emanuel and Whitesell if all relevant securities they own were redeemed for shares of our Class A common stock), respectively, as of the completion of this offering (together with (i), a “Triggering Event”). See “Description of Capital Stock.”

 

Use of proceeds

We estimate that our net proceeds from this offering will be approximately $361.6 million (or approximately $419.3 million if the underwriters exercise their option to purchase additional shares in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus). We intend to cause Endeavor Operating Company to



 

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use the net proceeds from this offering to repay $325 million of the outstanding term loan borrowings under our 2014 Credit Facilities (as defined below), for working capital and for general corporate purposes. We may also use a portion of the net proceeds from this offering for acquisitions of complementary businesses or other assets. Initially, we intend to contribute $382.8 million of the net proceeds from this offering to Endeavor Manager (or $440.5 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering (provided that we may reduce such contribution amount, without reducing the number of Endeavor Manager Units we receive, by the amount of any expenses we pay in connection with this offering (which we estimate will be approximately $21.2 million) that are not otherwise paid or for which we are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units. See “Use of Proceeds” for further details.

 

Conflicts of Interest

Certain affiliates of Credit Suisse Securities (USA) LLC, an underwriter in this offering, are expected to receive at least five percent of the net proceeds of this offering as a result of the repayment of outstanding term loan borrowings under our 2014 Credit Facilities, which would be considered a “conflict of interest” under the Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. As such, this offering is being conducted in accordance with FINRA Rule 5121. Pursuant to that rule, the appointment of a “qualified independent underwriter” is not required in connection with this offering because the members primarily responsible for managing the public offering do not have a conflict of interest, are not affiliates of any member that has a conflict of interest and meet the requirements of paragraph (f)(12)(E) of FINRA Rule 5121. See “Use of Proceeds” and “Underwriting (Conflicts of Interest).”

 

Dividend policy

We do not expect to pay any dividends or other distributions on our Class A common stock in the foreseeable future. We currently intend to retain future earnings. See “Dividend Policy.”

 

Proposed Exchange symbol

“EDR.”

 

Risk factors

You should read the “Risk Factors” section of this prospectus for a discussion of factors that you should consider carefully before deciding to invest in shares of our Class A common stock.

Unless we indicate otherwise or the context otherwise requires, the information in this prospectus:

 

   

gives effect to the reorganization transactions and the reclassification of existing ownership interests in Endeavor Operating Company into 220,192,668 Endeavor Operating Company Units;

 

   

assumes an initial public offering price of $27.00 per share of Class A common stock, which is the highpoint of the range set forth on the cover page of this prospectus;



 

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assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us;

 

   

excludes shares issuable pursuant to stock options, restricted stock units or other equity-based awards with respect to an aggregate amount of 15,000,000 shares of Class A common stock, that are initially reserved for issuance under the Endeavor Group Holdings, Inc. 2019 Incentive Award Plan (the “2019 Incentive Award Plan”) following the completion of this offering. See “Executive Compensation—2019 Incentive Award Plan;”

 

   

excludes approximately 1,880,946 restricted stock units and 1,617,774 options based on the highpoint of the estimated public offering price range set forth on the cover page of this prospectus that we intend to grant to certain directors, employees and other service providers in connection with this offering. See “Executive Compensation—Compensation Discussion and Analysis—New Equity Awards.”

 

   

excludes 11,138,461 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Manager Units (together with corresponding shares of our Class X common stock);

 

   

excludes 99,159,850 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (together with corresponding shares of our Class X common stock);

 

   

excludes 391,986 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units with performance-based vesting conditions that will remain outstanding with a weighted-average per unit vesting price of $34.25 (and paired shares of Class X common stock);

 

   

excludes 10,398,847 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (and paired shares of Class X common stock) issuable upon the exercise of the exchange rights of the holders of Endeavor Profits Units that will remain outstanding with a weighted-average per unit hurdle price of $21.20;

 

   

excludes 5,488,662 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (and paired shares of Class X common stock) issuable upon the exercise of the exchange rights of the holders of Endeavor Profits Units with performance-based vesting conditions that will remain outstanding with a weighted-average per unit vesting price of $37.30 per unvested Endeavor Operating Company Unit and a weighted-average per unit hurdle price of $23.22;

 

   

excludes Endeavor Phantom Units, which, at the time of this offering, and subject to certain conditions and limitations, would entitle their holders to cash equal to the value of (a) 878,982 Endeavor Operating Company Units, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), and excluding 183,743 Endeavor Phantom Units with performance-based vesting conditions whose vesting conditions would not be satisfied at the time of this offering assuming such initial offering price, or (b) 1,402,531 Endeavor Operating Company Units, if all performance-based vesting conditions of Endeavor Phantom Units with such conditions were satisfied and all Endeavor Phantom Units that track the value of Endeavor Profits Units instead tracked the value of Endeavor Operating Company Units on a one-to-one basis (regardless of such Endeavor Profits Units’ in-the-money value). The Company has historically settled Endeavor Phantom Units in cash, but may in its discretion settle these in Endeavor Manager Units, Endeavor Operating Company Units or Endeavor Profits Units.

Securities Outstanding at Assumed Offering Price

Although the total number of Endeavor Operating Company Units and Endeavor Manager Units outstanding after the offering will not fluctuate based on the trading price of our Class A common stock, certain share



 

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information and information regarding Endeavor Operating Company Units and Endeavor Manager Units presented in this prospectus will vary depending on the initial public offering price in this offering. Specifically, the number of Endeavor Operating Company Units and Endeavor Manager Units issued in the reorganization transactions will vary, depending on the initial public offering price in this offering, which will also impact the shares of Class X common stock and Class Y common stock, received by members of Endeavor Manager (other than Endeavor Group Holdings) and members of Endeavor Operating Company (other than Endeavor Manager). An increase in the assumed initial public offering price would result in a decrease in the amount of Endeavor Operating Company Units and Endeavor Manager Units, and in turn, shares of Class X common stock, received by holders of Endeavor Manager Units (other than Endeavor Group Holdings) and shares of Class X common stock and Class Y common stock, as applicable, received by members of Endeavor Operating Company (other than Endeavor Manager). A decrease in the assumed initial public offering price would result in an increase in the amount of Endeavor Operating Company Units and Endeavor Manager Units, and in turn, shares of Class X common stock, received by holders of Endeavor Manager Units (other than Endeavor Group Holdings) and shares of Class X common stock and Class Y common stock, as applicable, received by members of Endeavor Operating Company (other than Endeavor Manager).

For illustrative purposes only, the table below shows the number of Endeavor Manager Units held by members of Endeavor Manager (other than Endeavor Group Holdings), Endeavor Operating Company Units held by members of Endeavor Operating Company (other than Endeavor Manager), shares of Class X common stock and Class Y common stock outstanding immediately after giving effect to the reorganization transactions and this offering (assuming no exercise of the underwriters’ option to purchase additional shares of Class A common stock from us) at various initial public offering prices:

 

     Class A
Common Stock
     Endeavor Manager
Units held by
members of
Endeavor Manager
(other than
Endeavor Group
Holdings)
     Endeavor Operating
Company Units
held by members of
Endeavor Operating
Company (other
than Endeavor
Manager)
     Class X
Common Stock
     Class Y
Common Stock
 

$26.00

     124,894,357        11,071,067        99,005,037        126,355,599        176,258,504  

$27.00

     124,894,357        11,138,461        99,159,850        126,577,806        176,413,317  


 

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The table above excludes the following interests: (i) Endeavor Operating Company Units with performance-based vesting conditions that will remain outstanding with a weighted-average per unit vesting price; (ii) Endeavor Profits Units that will remain outstanding with a weighted-average per unit hurdle price; and (iii) Endeavor Profits Units with performance-based vesting conditions that will remain outstanding with a weighted-average per unit vesting price and a weighted-average per unit hurdle price. For illustrative purposes, the table below shows the number of such interests outstanding immediately after giving effect to the reorganization transactions and this offering (assuming no exercise of the underwriters’ option to purchase additional shares of Class A common stock from us) at various initial public offering prices:

 

     Endeavor
Operating
Company
Units (with
performance-
based vesting
conditions)
     Endeavor
Profits Units
(with a
weighted-
average per
unit hurdle
price)
     Endeavor
Profits Units
(with
performance-
based vesting
conditions
and a
weighted-
average per
unit hurdle
price)
 

$26.00

     391,986        10,398,847        5,488,662  

$27.00

     391,986        10,398,847        5,488,662  

Unless we indicate otherwise throughout this prospectus or the context otherwise requires, all information in this prospectus assumes (i) there are no restrictions on the ability of holders of Endeavor Operating Company Units or Endeavor Manager Units, in each case together with corresponding shares of our Class X common stock, to exercise at any time and from time to time the redemption rights described elsewhere in this prospectus, (ii) that, in each case where a member of Endeavor Operating Company or Endeavor Manager exercises such rights to cause Endeavor Operating Company or Endeavor Manager to redeem any or all of its Endeavor Operating Company Units (and in each case paired shares of Class X common stock) or Endeavor Manager Units (and paired shares of Class X common stock), as applicable, we determine to issue shares of Class A common stock in exchange therefor, rather than redeem or exchange for cash and (iii) there will be no exchange of Endeavor Profits Units for Endeavor Operating Company Units and paired shares of Class X common stock as described in “Organizational Structure.”



 

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Summary Historical and Pro Forma Consolidated Financial and Other Data

The following tables set forth our summary historical consolidated financial and other data for the periods presented. We were formed as a Delaware corporation in January 2019 and have not, to date, conducted any activities other than those incidental to our formation and the preparation of this prospectus and the registration statement of which this prospectus forms a part. On August 18, 2016, Endeavor Operating Company acquired UFC Parent and the following tables reflect the consolidation of UFC Parent from August 18, 2016. We originally acquired 34% of UFC Parent’s common equity and increased our ownership percentage to 50.1% in August 2017.

The consolidated statements of operations data for the years ended December 31, 2016, 2017 and 2018 and the consolidated balance sheet data as of December 31, 2018 have been derived from Endeavor Operating Company’s audited consolidated financial statements included elsewhere in this prospectus. The consolidated statements of operations data for the six months ended June 30, 2018 and 2019 and the consolidated balance sheet data as of June 30, 2019 have been derived from Endeavor Operating Company’s unaudited consolidated financial statements included elsewhere in this prospectus.

The unaudited pro forma consolidated statements of operations for the year ended December 31, 2018 and the six months ended June 30, 2019 give effect to (i) the Preferred Equity Redemption, (ii) the reorganization transactions described under “Organizational Structure,” (iii) the creation or acquisition of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iv) the adoption of the 2019 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, and (v) this offering and the application of the net proceeds as described under “Use of Proceeds,” as if each had occurred on January 1, 2018. The unaudited pro forma consolidated balance sheet as of June 30, 2019 gives effect to (i) the Preferred Equity Redemption, (ii) the reorganization transactions described under “Organizational Structure,” (iii) the acquisition or creation of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iv) the adoption of the 2019 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, and (v) this offering and the application of the net proceeds from this offering as described under “Use of Proceeds,” as if each had occurred on June 30, 2019.

The summary historical and unaudited pro forma consolidated financial and other data presented below do not purport to be indicative of the results that can be expected for any future period and should be read together with “Capitalization,” “Unaudited Pro Forma Financial Information,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our respective consolidated financial statements and related notes thereto included elsewhere in this prospectus.



 

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Consolidated Statements of Operations Data:

 

    Years Ended
December 31,
    Six Months Ended
June 30,
    Pro Forma
Year Ended
December 31,
    Pro Forma Six
Months Ended
June 30,
 
    2016     2017     2018     2018     2019     2018     2019  
(In thousands, except per share data)      

Revenue

  $ 2,366,960     $ 3,020,116     $ 3,613,478     $ 1,500,863     $ 2,048,552     $ 3,613,478     $ 2,048,552  
             

Total operating expenses

    2,364,114       3,078,241       3,720,897       1,633,665       2,038,188       3,744,539       2,045,385  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) from continuing operations

    2,846       (58,125     (107,419     (132,802     10,364       (131,061     3,167  

Interest expense, net

    (197,707     (261,226     (277,200     (134,739     (142,084     (283,442     (146,220

Loss from continuing operations, net of tax

    (129,130     (200,159     (463,694     (402,199     (215,296     (470,100     (210,305

Income (loss) from discontinued operations, net of tax (including gain on sale in 2018)

    30,814       26,991       694,998       (73,413     (5,000    

Net (loss) income

    (98,316     (173,168     231,304       (475,612     (220,296    

Net loss attributable to non-controlling interests

    (58,417     (111,919     (85,241     (71,118     (27,718    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Net (loss) income attributable to Endeavor Operating Company,
LLC

  $ (39,899   $ (61,249   $ 316,545     $ (404,494   $ (192,578    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Loss from continuing operations attributable to non-controlling interests

              (290,884     (128,559
           

 

 

   

 

 

 

Loss from continuing operations attributable to Endeavor Group Holdings, Inc.

            $ (179,216   $ (81,746
           

 

 

   

 

 

 

Pro forma loss per share data:

             

Basic and diluted loss per share of Class A common stockholders:

             

Continuing operations:

             

Basic

              (3.76     (1.68

Diluted

              (3.76     (1.68

Continuing operations attributable to Endeavor Group Holdings, Inc.:

             

Basic

              (1.43     (0.65

Diluted

              (1.43     (0.65

Weighted average number of shares used in computing loss per share

             

Basic

              124,894,366       129,894,366  

Diluted

              124,894,366       129,894,366  

Unaudited Financial Data:

             

Adjusted EBITDA(1)

  $ 355,145     $ 516,103     $ 551,086     $ 206,622     $ 249,675      

Adjusted EBITDA margin(1)

    15.0     17.1     15.3 %     13.8     12.2    

Adjusted Net Income (Loss)(1)

  $ 32,858     $ 89,677     $ 100,117     $ (33,731   $ 47,227      

Consolidated Balance Sheet Data:

 

    As of December 31,    
As of June 30,
    Pro Forma
As of June 30,
 
(In thousands)   2018     2019     2019  

Cash and cash equivalents

  $ 768,080     $ 830,936     $ 721,062  

Total assets

    9,665,132       10,003,594       9,868,922  

Long-term debt, including current portion

    4,642,013       4,599,271       4,739,043  

Total liabilities

    6,674,443       7,235,463       7,467,913  

Redeemable non-controlling interests

    155,666       151,301       151,301  

Redeemable equity

    43,693       43,693       —    

Members’ equity/shareholders’ equity

    1,585,066       1,346,857       1,091,036  

Nonredeemable non-controlling interests

    1,206,264       1,226,280       1,158,672  

Total members’/shareholders’ equity

    2,791,330       2,573,137       2,249,708  


 

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(1)

Adjusted EBITDA is a non-GAAP financial measure and is defined as net income (loss), adjusted to exclude the results of discontinued operations, income taxes, net interest expense, depreciation and amortization, equity-based compensation, merger, acquisition and earn-out costs, certain legal costs, restructuring, severance and impairment charges, certain non-cash fair value adjustments, certain equity earnings and certain other items identified as affecting comparability, when applicable. Adjusted EBITDA margin is a non-GAAP financial measure and is defined as Adjusted EBITDA divided by revenue.

Management believes that Adjusted EBITDA is useful to investors as it eliminates certain items identified as affecting the period-over-period comparability of our operating results, and that Adjusted EBITDA margin accordingly provides a performance margin adjusted for such items affecting comparability. Adjusted EBITDA eliminates the significant level of non-cash depreciation and amortization expense that results from our capital investments and intangible assets recognized in business combinations, and improves comparability by eliminating the significant level of interest expense associated with our debt facilities, as well as income taxes, which may not be comparable with other companies based on our tax structure.

Adjusted EBITDA and Adjusted EBITDA margin are used as the primary bases for our Chief Operating Decision Maker (“CODM”) to evaluate our consolidated operating performance and the operating performance of each of our reportable segments and is used for planning and forecasting purposes, including the allocation of resources and capital to our segments.

Adjusted Net Income is a non-GAAP financial measure and is defined as net income (loss) attributable to Endeavor Operating Company, adjusted to exclude the results of discontinued operations and our share (excluding those relating to non-controlling interests) of the adjustments used to calculate Adjusted EBITDA, other than income taxes, net interest expense and depreciation, on an after tax basis, the release of tax valuation allowances and other tax items.

Adjusted Net Income adjusts income or loss from continuing operations attributable to the Company for items not considered reflective of our operating performance. Management believes that such non-GAAP information is useful to investors and analysts as it provides a better understanding of the performance of our continuing operations for the periods presented and, accordingly, facilitates the development of future projections and earnings growth prospects.

Other companies may define Adjusted EBITDA, Adjusted EBITDA margin or Adjusted Net Income differently, and as a result our measures of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income may not be directly comparable to those of other companies. Although we use Adjusted EBITDA and Adjusted EBITDA margin as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income should be considered in addition to, and not as a substitute for, net income (loss) in accordance with GAAP as a measure of performance. Our presentation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

   

they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

 

   

Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;

 

   

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income do not reflect any cash requirement for such replacements or improvements; and



 

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they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.

Because of these limitations, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income are not intended as alternatives to net income (loss) as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Our GAAP-based measures can be found in our consolidated financial statements and related notes included elsewhere in this prospectus.

The following table reconciles net (loss) income to Adjusted EBITDA:

 

    Years Ended
December 31,
    Six
Months Ended
June 30,
 
(In thousands)   2016     2017     2018     2018     2019  

Net (loss) income

  $ (98,316)     $ (173,168)     $ 231,304     $ (475,612)     $ (220,296)  

(Income) loss from discontinued operations, net of tax (including gain on sale in 2018)

    (30,814)       (26,991)       (694,998)       73,413       5,000  

Provision for (benefit from) income taxes

    16,953       (29,824)       88,235       92,938       (8,777)  

Interest expense, net

    197,707       261,226       277,200       134,739       142,084  

Depreciation and amortization

    175,134       341,144       365,959       180,893       143,353  

Equity-based compensation expense(1)

    87,644       153,997       149,138       88,908       45,447  

Merger, acquisition and earn-out costs(2)

    75,525       55,202       66,577       37,980       26,134  

Certain legal costs(3)

    (481)       21,292       26,677       16,487       9,810  

Restructuring, severance and impairment(4)

    26,502       12,313       38,363       4,308       32,010  

Fair value adjustment – Droga5(5)

    (106,736)       (83,579)       38,962       33,057       3,734  

Fair value adjustment – equity investments(6)

    —         —         (67,318)       4,250       7,283  

Equity method losses – Learfield IMG College(7)

    —         —         —         —         19,183  

Other(8)

    12,027       (15,509)       30,987       15,261       44,710  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 355,145     $ 516,103     $ 551,086     $ 206,622     $ 249,675  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

    15.0     17.1     15.3     13.8     12.2


 

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The following table reconciles net (loss) income to Adjusted Net Income (Loss):

 

    Years Ended
December 31,
    Six
Months Ended
June 30,
 
(In thousands)   2016     2017     2018     2018     2019  

Net (loss) income

  $ (98,316)     $ (173,168)     $ 231,304     $ (475,612)     $ (220,296)  

Net loss attributable to non-controlling interests

    58,417       111,919       85,241       71,118       27,718  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Endeavor Operating Company, LLC

    (39,899)       (61,249)       316,545       (404,494)       (192,578)  

(Income) loss from discontinued operations, net of tax (including gain on sale in 2018)

    (30,814)       (26,991)       (694,998)       73,413       5,000  

Amortization

    126,053       281,585       301,162       147,697       110,823  

Equity-based compensation expense(1)

    87,644       153,997       149,138       88,908       45,447  

Merger, acquisition and earn-out costs(2)

    75,525       55,202       66,577       37,980       26,134  

Certain legal costs(3)

    (481)       21,292       26,677       16,487       9,810  

Restructuring, severance and impairment(4)

    26,502       12,313       38,363       4,308       32,010  

Fair value adjustment – Droga5(5)

    (106,736)       (83,579)       38,962       33,057       3,734  

Fair value adjustment – equity investments(6)

    —         —         (67,318)       4,250       7,283  

Equity method losses – Learfield IMG College(7)

    —         —         —         —         19,183  

Other(8)

    12,027       (15,509)       30,987       15,261       44,710  

Tax effects of adjustments(9)

    (3,001)       (5,480)       (9,295)       (8,036)       (9,901)  

Adjustments allocated to non-controlling interests(10)

    (113,962)       (165,429)       (135,990)       (64,362)       (54,428)  

Valuation allowance and other tax items(11)

    —         (76,475)       39,307       21,800       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net Income (Loss)

  $ 32,858     $ 89,677     $ 100,117     $ (33,731)     $ 47,227  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Equity-based compensation expense represents primarily non-cash compensation expense associated with our equity-based compensation plans.

The decrease for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 is primarily due to put rights entered into with certain senior executives during the six months ended June 30, 2018, which was not repeated in 2019, as well as certain outstanding equity-based awards becoming fully vested prior to 2019, offset by expense related to new senior executive awards. For the six months ended June 30, 2018, equity-based compensation expense primarily related to our Representation segment and Corporate and other. For the six months ended June 30, 2019, equity-based compensation expense primarily related to our Entertainment & Sports and Representation segments and Corporate and other.

The decrease for the year ended December 31, 2018 as compared to the year ended December 31, 2017 is primarily due to approximately $70 million of compensation expense related to a repurchase offered to employees in 2017, which will be paid in cash over three years, and which was not repeated in 2018. Such decrease was partially offset by additional expense from new awards granted in 2018 and a full year of expense from grants awarded in 2017. In 2017 and 2018, equity-based compensation expense primarily related to our Representation segment and Corporate and other.

The increase for the year ended December 31, 2017 as compared to the year ended December 31, 2016 primarily related to the repurchase offered to employees noted above. Equity-based compensation expense in 2016 had a comparable impact on our Entertainment & Sports and Representation segments as well as Corporate and other.

 

(2)

Includes (i) certain costs of professional advisors related to mergers, acquisitions, dispositions or joint ventures and (ii) fair value adjustments for contingent consideration liabilities related to acquired businesses and compensation expense for deferred consideration associated with selling shareholders that are required to remain our employees.

Such costs for the six months ended June 30, 2019 related primarily to our Representation segment, of which the largest component was earn-out adjustments. Acquisition earn-out adjustments were approximately $15 million and primarily related to Fusion Marketing and IMG Live and various smaller acquisitions.



 

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Such costs for the six months ended June 30, 2018 related primarily to our Representation segment, of which the largest component was earn-out adjustments, as well as Corporate and other, of which the largest component was professional advisor costs. Acquisition earn-out adjustments were approximately $20 million and primarily related to 160over90, Fusion Marketing and IMG Live and various smaller acquisitions.

Such costs for the year ended December 31, 2018 related primarily to our Representation segment, of which the largest component was earn-out adjustments, as well as Corporate and other, of which the largest component was professional advisor costs. Acquisition earn-out adjustments were approximately $36 million and primarily related to 160over90, Fusion Marketing and IMG Live as well as various smaller acquisitions.

Such costs for the year ended December 31, 2017 related primarily to our Entertainment & Sports segment and the largest component was earn-out adjustments. Acquisition earn-out adjustments were approximately $42 million and related to UFC, Fusion Marketing and IMG Live as well as various smaller acquisitions.

Such costs for the year ended December 31, 2016 related primarily to our Entertainment & Sports segment and the largest component was professional service costs of approximately $57 million related to the acquisition of UFC. Acquisition earn-out adjustments were approximately $6 million and primarily related to Fusion Marketing and IMG Live and various smaller acquisitions.

 

(3)

Includes costs related to certain litigation or regulatory matters. Such costs for the year ended December 31, 2018 and for the six months ended June 30, 2019 and 2018 related primarily to our Entertainment & Sports segment and Corporate and other. Such costs for the years ended December 31, 2016 and 2017 had comparable impact on our Entertainment & Sports segment and Corporate and other.

 

(4)

Includes certain costs related to our restructuring activities and non-cash impairment charges.

Such costs for the six months ended June 30, 2019 included approximately $25 million related to the impairment of certain investments and approximately $7 million for severance and restructuring expenses and primarily related to our Endeavor X and Entertainment & Sports segments.

Such costs for the six months ended June 30, 2018 primarily related to severance and restructuring expenses and primarily related to our Representation segment and Corporate and other.

Such costs for the year ended December 31, 2018 primarily related to severance and restructuring expenses, including costs related to the cessation of operations of certain events and the impairment of related assets, and had a comparable impact on our Entertainment & Sports and Representation segments.

Such costs for the year ended December 31, 2017 primarily related to severance and restructuring expenses and had a comparable impact on our Entertainment & Sports and Representation segments and Corporate and other.

Such costs for the year ended December 31, 2016 included approximately $12 million primarily related to the impairment of certain events and approximately $12 million for severance and restructuring expenses, including approximately $6 million related to cost reduction initiatives in UFC and primarily related to our Entertainment & Sports and Representation segments.

 

(5)

Reflects the change in fair value of our investment in Droga5, which was accounted for using the fair value option through the disposal of our interest in April 2019. Such non-cash fair value adjustments relate wholly to our Representation segment.

 

(6)

Includes the net change in fair value for certain equity investments with and without readily determinable fair values, based on observable price changes, in connection with the adoption of ASU 2016-01 and ASU 2018-03 effective January 1, 2018.

 

(7)

Relates to equity method losses from our investment in Learfield IMG College following the merger of our IMG College business with Learfield Communications, LLC in December 2018. Prior to December 2018 and its disposal, income or loss from our IMG College business is classified as discontinued operations.



 

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(8)

For the six months ended June 30, 2019, other costs primarily comprised charges of approximately $19 million related to the impairment of a note receivable due from an equity investment related to our Representation segment, approximately $14 million related to non-cash fair value adjustments of embedded foreign currency derivatives related to our Entertainments & Sports segment, approximately $7 million of costs associated with the refinancing of our UFC Credit Facilities, which related primarily to our Entertainments & Sports segment, and charges of approximately $5 million related to a premium on the redemption of certain equity units held by an investor, which related to Corporate and other.

For the six months ended June 30, 2018, other costs primarily comprised charges of approximately $18 million associated with the refinancing of our 2014 Credit Facilities, which related primarily to Corporate and other, approximately $8 million of charges related to non-cash fair value adjustments of embedded foreign currency derivatives related to our Entertainments & Sports segment and approximately $4 million of losses on foreign exchange transactions, which related primarily to our Entertainment & Sports segment and Corporate and other, partially offset by a gain on disposal of a business of approximately $17 million, which related to our Representation segment.

For the year ended December 31, 2018, other costs primarily comprised charges of approximately $19 million of costs associated with the refinancing of our 2014 Credit Facilities, which related primarily to Corporate and other, approximately $19 million related to the non-cash fair value adjustment of our UFC warrant liability at the Entertainment & Sports segment, as well as approximately $8 million of losses on foreign exchange transactions, which related primarily to our Entertainment & Sports segment and Corporate and other. In 2018, these charges were partially offset by approximately $18 million of a gain on disposal of a business, which related to our Representation segment.

For the year ended December 31, 2017 , other costs primarily comprised approximately $14 million of gains on disposal of certain businesses and approximately $12 million of gains on foreign exchange transactions, partially offset by charges of approximately $6 million related to the non-cash fair value adjustment of our UFC warrant liability at the Entertainment & Sports segment as well as approximately $3 million of costs associated with the refinancing of our 2014 Credit Facilities and related primarily to our Representation segment and Corporate and other.

For the year ended December 31, 2016, other costs primarily comprised approximately $10 million of foreign exchange transaction losses offset by approximately $7 million of gains on the disposal of certain businesses and related primarily to our Entertainment & Sports segment and Corporate and other.

 

(9)

Reflects the U.S. and non-U.S. tax impacts with respect to each adjustment noted above, as applicable.

 

(10)

Reflects the share of the adjustments noted above that are allocated to our non-controlling interests, net of tax.

 

(11)

Such items for the six months ended June 30, 2018 relate to a $21.8 million net tax expense recorded as a result of our acquisition of NeuLion and subsequent tax restructuring.

Such items for the year ended December 31, 2018 relate to a $21.8 million net tax expense recorded as a result of our acquisition of NeuLion and subsequent tax restructuring and $17.5 million related to the tax impact of losses recognized on certain agreements for foreign statutory purposes, subject to limitation under foreign tax law.

Such item for the year ended December 31, 2017 relates to the release of the valuation allowance on net U.S. deferred tax assets, exclusive of deferred tax liabilities on indefinite lived intangible assets, state income taxes and foreign tax credits.



 

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RISK FACTORS

Investing in our Class A common stock involves substantial risks. You should carefully consider the following factors, together with all of the other information included in this prospectus, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes included elsewhere in this prospectus, before investing in our Class A common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our Class A common stock could decline if one or more of these risks or uncertainties develop into actual events, causing you to lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur. While we believe these risks and uncertainties are especially important for you to consider, we may face other risks and uncertainties that could adversely affect our business. Please also see “Forward-Looking Statements” for more information.

Risks Related to Our Business

Changes in public and consumer tastes and preferences and industry trends could reduce demand for our services and content offerings and adversely affect our business.

Our ability to generate revenues is highly sensitive to rapidly changing consumer preferences and industry trends, as well as the popularity of the talent, brands and owners of IP we represent, and the assets we own. Our success depends on our ability to offer premium content through popular channels of distribution that meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. Our operations and revenues are affected by consumer tastes and entertainment trends, including the market demand for the distribution rights to live sports events, which are unpredictable and subject to change and may be affected by changes in the social and political climate. Changes in consumers’ tastes or a change in the perceptions of our business partners, whether as a result of the social and political climate or otherwise, could adversely affect our operating results. Our failure to avoid a negative perception among consumers or anticipate and respond to changes in consumer preferences, including in the form of content creation or distribution, could result in reduced demand for our services and content offerings or those of our clients and owned assets across our platform, which could have an adverse effect on our business, financial condition and results of operations.

Our ability to create popular entertainment and sports content is increasingly important to the success of our business and our ability to generate revenues. The production and sales of programming, films and other entertainment and sports content is inherently risky because the revenues we derive from various sources primarily depend on our ability to satisfy consumer tastes and expectations in a consistent manner. The popularity of our content and owned assets is affected by our ability to maintain or develop strong brand awareness and target key audiences, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. Consumer tastes change frequently and it is a challenge to anticipate what offerings will be successful at any point in time. We invest substantial capital in our content and owned assets, including in the creation of original content, before learning the extent to which it will achieve popularity with consumers. For example, as of December 31, 2018 we have committed to spending approximately $3.7 billion in guaranteed payments for media, event or other representation rights and similar expenses over the next five years, regardless of our ability to profit from these rights. A lack of popularity of these, our other content offerings or our owned assets, as well as labor disputes, unavailability of a star performer, equipment shortages, cost overruns, disputes with production teams or adverse weather conditions, could have an adverse effect on our business, financial condition and results of operations.

Our ability to generate revenue from discretionary and corporate spending on entertainment and sports events, such as corporate sponsorships and advertising, is subject to many factors, including many that are beyond our control, such as general macroeconomic conditions.

Our business depends on discretionary consumer and corporate spending. Many factors related to corporate spending and discretionary consumer spending, including economic conditions affecting disposable consumer

 

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income such as unemployment levels, fuel prices, interest rates, changes in tax rates and tax laws that impact companies or individuals and inflation can significantly impact our operating results. While consumer and corporate spending may decline at any time for reasons beyond our control, the risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by reductions in corporate sponsorship and advertising and decreases in attendance at live entertainment and sports events. During periods of reduced economic activity, many consumers have historically reduced their discretionary spending and advertisers have reduced their sponsorship and advertising expenditures, which can result in a reduction in sponsorship opportunities. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions, or by any future deterioration in economic conditions, thereby possibly impacting our operating results and growth. A prolonged period of reduced consumer or corporate spending could have an adverse effect on our business, financial condition and results of operations.

We may not be able to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies.

We must successfully adapt to and manage technological advances in our industry, including the emergence of alternative distribution platforms. If we are unable to adopt or are late in adopting technological changes and innovations that other entertainment providers offer, it may lead to a loss of consumers viewing our content, a reduction in revenues from attendance at our live events, a loss of ticket sales or lower ticket fees. It may also lead to a reduction in our clients’ ability to monetize new platforms. Our ability to effectively generate revenue from new distribution platforms and viewing technologies will affect our ability to maintain and grow our business. Emerging forms of content distribution may provide different economic models and compete with current distribution methods (such as television, film and pay-per-view (“PPV”) in ways that are not entirely predictable, which could reduce consumer demand for our content offerings. We must also adapt to changing consumer behavior driven by advances that allow for time shifting and on-demand viewing, such as digital video recorders and video-on-demand, as well as internet-based and broadband content delivery and mobile devices. If we fail to adapt our distribution methods and content to emerging technologies and new distribution platforms, while also effectively preventing digital piracy, our ability to generate revenue from our targeted audiences may decline and could result in an adverse effect on our business, financial condition and results of operations.

Because our success depends substantially on our ability to maintain a professional reputation, adverse publicity concerning us, one of our businesses, our clients or our key personnel could adversely affect our business.

Our professional reputation is essential to our continued success and any decrease in the quality of our reputation could impair our ability to, among other things, recruit and retain qualified and experienced agents, managers and other key personnel, retain or attract agency clients or customers or enter into multimedia, licensing and sponsorship engagements. Our overall reputation may be negatively impacted by a number of factors, including negative publicity concerning us, members of our management or our agents, managers and other key personnel. In addition, we are dependent for a portion of our revenues on the relationships between content providers and the clients and key brands, such as sports leagues and federations and collegiate sporting institutions, that we represent, many of whom are significant public personalities with large social media followings whose actions generate significant publicity and public interest. Any adverse publicity relating to such individuals or entities that we employ or represent, or to our company, including from reported or actual incidents or allegations of illegal or improper conduct, such as harassment, discrimination or other misconduct, could result in significant media attention, even if not directly relating to or involving Endeavor, and could have a negative impact on our professional reputation, potentially resulting in termination of licensing or other contractual relationships, our or our employees’ inability to attract new customer or client relationships, or the loss or termination of such employees’ services, all of which could adversely affect our business, financial condition and results of operations. Our professional reputation could also be impacted by adverse publicity relating to one or more of our owned or majority owned brands, events or businesses.

 

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We depend on the relationships of our agents, managers and other key personnel with clients across many categories, including television, film, professional sports, fashion, music, literature, theater, digital, sponsorship and licensing.

We depend heavily upon relationships that our agents, managers and other key personnel have developed with clients across many content categories, including, among others, television, film, professional sports, fashion, music, literature, theater, digital, sponsorship and licensing. The personal relationships that our agents, managers and other key personnel have developed with studios, brands and other key business contacts help us to secure access to sponsorships, endorsements, professional contracts, productions, events and other opportunities for our clients, which is critical to our success. Due to the importance of those industry contacts to us, a substantial deterioration in these relationships, or substantial loss of agents, managers or other key personnel who maintain these relationships, could adversely affect our business. In particular, our client management business is dependent upon the highly personalized relationships between our agent and manager teams and their respective clients. A substantial deterioration in the team managing a client may result in a deterioration in our relationship with, or the loss of, the clients represented by that agent or manager. The substantial loss of multiple agents or managers and their associated clients could have an adverse effect on our business, financial condition and results of operations. Most of our agents, managers and other key personnel are not party to long-term contracts and, in any event, can leave our employment with little or no notice. We can give no assurance that all or any of these individuals will remain with us or will retain their associations with key business contacts.

Our success depends, in part, on our continuing ability to identify, recruit and retain qualified and experienced agents and managers. If we fail to recruit and retain suitable agents or if our relationships with our agents change or deteriorate, it could adversely affect our business.

Our success depends, in part, upon our continuing ability to identify, recruit and retain qualified and experienced agents and managers. There is great competition for qualified and experienced agents and managers in the entertainment and sports industry, and we cannot assure you that we will be able to continue to hire or retain a sufficient number of qualified persons to meet our requirements, or that we will be able to do so under terms that are economically attractive to us. Any failure to retain certain agents and managers could lead to the loss of sponsorship, multimedia and licensing agreements and other engagements and have an adverse effect on our business, financial condition and results of operations.

Our failure to identify, sign and retain clients could adversely affect our business.

We derive substantial revenue from the engagements, sponsorships, licensing rights and distribution agreements entered into by the clients with whom we work. We depend on identifying, signing and retaining as clients those artists, athletes, models and key brands whose identities or brands are in high demand by the public and, as a result, are deemed to be favorable candidates for engagements. Our competitive position is dependent on our continuing ability to attract, develop and retain clients whose work is likely to achieve a high degree of value and recognition as well as our ability to provide such clients with sponsorships, endorsements, professional contracts, productions, events and other opportunities. Our failure to attract and retain these clients, an increase in the costs required to attract and retain such clients, or an untimely loss or retirement of these clients could adversely affect our financial results and growth prospects. We have not entered into written agreements with many of the clients we represent. These clients may decide to discontinue their relationship with us at any time and without notice. In addition, the clients with whom we have entered into written contracts may choose not to renew their contracts with us on reasonable terms or at all or they may breach or seek to terminate these contracts. If any of our clients decide to discontinue their relationships with us, whether they are under a contract or not, we may be unable to recoup costs expended to develop and promote them and our financial results may be adversely affected. Further, the loss of such clients could lead other of our clients to terminate their relationships with us.

We derive substantial revenue from the sale of multimedia rights, licensing rights and sponsorships. A significant proportion of this revenue is dependent on our commercial agreements with entertainment and sports

 

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events. Our failure to renew or replace these key commercial agreements on similar or better terms could have an adverse effect on our business, financial condition and results of operations.

Our business involves potential internal conflicts of interest and includes our client representation businesses representing both talent and content rights holders and distributors while our content businesses produce content, which may create a conflict of interest.

Increasingly, we must manage actual and potential internal conflicts of interest in our business due to the breadth and scale of our platform. Different parts of our business may have actual or potential conflicts of interests with each other, including our client representation, media production, events production, sponsorship, and content development businesses. Although we attempt to manage these conflicts appropriately, any failure to adequately address or manage internal conflicts of interest could adversely affect our reputation and the willingness of clients and third parties to work with us may be affected if we fail, or appear to fail, to deal appropriately with actual or perceived internal conflicts of interest, which could have an adverse effect on our business, financial condition and results of operations.

The markets in which we operate are highly competitive, both within the United States and internationally.

We face competition from a variety of other domestic and foreign companies. We face competition from alternative providers of the content, services and events we and our clients offer and from other forms of entertainment and leisure activities in a rapidly changing and increasingly fragmented marketplace. Any increased competition, which may not be foreseeable, or our failure to adequately address any competitive factors, could result in reduced demand for our content, live events, clients or key brands, which could have an adverse effect on our business, financial condition and results of operations.

We depend on the continued service of the members of our executive management and other key employees, as well as management of acquired businesses, the loss or diminished performance of whom could adversely affect our business.

Our performance is substantially dependent on the performance of the members of our executive management and other key employees, as well as management of acquired businesses. We seek to acquire businesses that have strong management teams and often rely on these individuals to conduct the day-to-day operations of and pursue the growth of these acquired businesses. Although we have entered into employment and severance protection agreements with certain members of our senior management team and we typically seek to sign employment agreements with the management of acquired businesses, we cannot be sure that any member of our senior management or management of the acquired businesses will remain with us or that they will not compete with us in the future. The loss of any member of our senior management team could impair our ability to execute our business plan and growth strategy, have a negative impact on our revenues and the effective working relationships that our executive management have developed and cause employee morale problems and the loss of additional key employees, agents, managers and clients.

We depend on key relationships with television and cable networks, satellite providers, digital streaming partners, corporate sponsors and other distribution partners.

A key component of our success is our relationships with television and cable networks, satellite providers, digital streaming partners, corporate sponsors and other distribution partners. We are dependent on maintaining these existing relationships and expanding upon them to ensure we have a robust network of corporate sponsors and distribution partners with whom we can work to arrange multimedia rights sales and sponsorship engagements, including distribution of our owned, operated or represented events. Our television programming for our owned, operated and represented events is distributed by television and cable networks, satellite providers, PPV, digital streaming and other media. We depend on many third parties for the operation and distribution of our television programming. Because a portion of our revenues are generated, directly and indirectly, from this distribution, any failure to maintain or renew arrangements with distributors and platforms,

 

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the failure of distributors or platforms to continue to provide services to us or the failure to enter into new distribution opportunities on terms favorable to us could adversely affect our business. We regularly engage in negotiations relating to substantial agreements covering the distribution of our television programming by carriers located in the United States and abroad. We have an important relationship with ESPN for UFC as they are the exclusive domestic home to all UFC events. We have agreements with multiple PPV providers globally and distribute a portion of our owned, operated or represented events through PPV, including certain events that are sold exclusively through PPV. Any adverse change in these relationships or agreements or a deterioration in the perceived value of our clients or of our sponsorships, advertisements or other distribution channels could have an adverse effect on our business, financial condition and results of operations.

Owning and managing certain events for which we sell media and sponsorship rights, ticketing and hospitality exposes us to greater financial risk. If the live events that we own and manage are not financially successful, our business could be adversely affected.

We act as a principal by owning and managing certain live events for which we sell media and sponsorship rights, ticketing and hospitality, such as UFC’s events, the Miami Open, the Miss Universe competition and the Professional Bull Riders’ events. Organizing and operating a live event involves significant financial risk as we bear all or most event costs, including a significant amount of up-front costs. In addition, we typically book our live events many months in advance of holding the event and often agree to pay a fixed guaranteed amount prior to receiving any related revenue. Accordingly, if a planned event fails to occur or there is any disruption in our ability to live stream or otherwise distribute, whether as a result of technical difficulties or otherwise, we could lose a substantial amount of these up-front costs, fail to generate the anticipated revenue and be forced to issue refunds for media and sponsorship rights, advertising fees and ticket sales. If we are forced to postpone a planned event, we would incur substantial additional costs in order to stage the event on a new date, may have reduced attendance and revenue and may have to refund fees. We could be compelled to cancel or postpone all or part of an event for many reasons, including poor weather, issues with obtaining permits or government regulation, performers failing to participate, as well as extraordinary incidents, such as mass-casualty incidents and natural disasters or similar events. Past terrorist and security incidents, military actions in foreign locations, periodic elevated terrorism alerts and pandemic or other public health concerns have raised numerous challenging operating factors, including public concerns regarding air travel, military actions and additional national or local catastrophic incidents, causing a nationwide disruption of commercial and leisure activities. We often have cancellation insurance policies in place to cover a portion of our losses if we are compelled to cancel an event, but our coverage may not be sufficient and is subject to deductibles. If the live events that we own and manage are not financially successful, we could suffer an adverse effect on our business, financial condition and results of operations.

Our recent acquisitions have caused us to grow rapidly, and we will need to continue to make changes to operate at our current size and scale. We may face difficulty in further integrating the operations of the businesses acquired in our recent transactions, and we may never realize the anticipated benefits and cost synergies from all of these transactions. If we are unable to manage our current operations or any future growth effectively, our business could be adversely affected.

Our recent acquisitions have caused us to grow rapidly, and we may need to continue to make changes to operate at our current size and scale. If we fail to realize the anticipated benefits and cost synergies from our recent acquisitions, or if we experience any unanticipated or unidentified effects in connection with these transactions, including one-time write-offs of goodwill, amortization expenses of other intangible assets or any unanticipated disruptions with important third-party relationships, our business, financial condition and results of operations could be adversely affected. Moreover, our recent acquisitions involve risks and uncertainties including, without limitation, those associated with the integration of operations, financial reporting, technologies and personnel and the potential loss of key employees, agents, managers, clients, customers or strategic partners. Because the integration of the businesses acquired in our recent transactions have and will require significant time and resources, and we may not be able to manage the process successfully, these acquisitions may not be accretive to our earnings and they may negatively impact our results of operations. If our operations continue to

 

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grow, we will be required, among other things, to upgrade our management information systems and other processes and to obtain more space for our expanding administrative support and other headquarters personnel. Our continued growth could strain our resources and divert management’s attention, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees. These difficulties could result in the erosion of our brand image and reputation and could have an adverse effect on our business, financial condition and operating results.

We may be unsuccessful in our strategic acquisitions, investments and commercial agreements, and we may pursue acquisitions, investments or commercial agreements for their strategic value in spite of the risk of lack of profitability.

We face significant uncertainty in connection with acquisitions, investments and commercial agreements. To the extent we choose to pursue certain commercial, investment or acquisition strategies, we may be unable to identify suitable targets for acquisition, investment opportunities or commercial deals, or to make these acquisitions, investments or deals on favorable terms. If we identify suitable acquisition candidates, investments or deals, our ability to realize a return on the resources expended pursuing such candidates, investments or deals and to successfully implement or enter into them will depend on a variety of factors, including our ability to obtain financing on acceptable terms and requisite governmental approvals as well as the factors discussed below. Additionally, we may decide to make or enter into acquisitions, investments or commercial agreements with the understanding that such acquisitions, investments or commercial agreements will not be profitable, but may be of strategic value to us. We cannot provide assurances that the anticipated strategic benefits of these acquisitions, investments or commercial agreements will be realized in the long-term or at all.

We may fail to identify or assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring a company, making an investment or entering into a commercial agreement and, as such may not obtain sufficient warranties, indemnities, insurance or other protections, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition. Additionally, some warranties and indemnities may give rise to unexpected and significant liabilities. Future acquisitions that and commercial arrangements we may pursue could result in dilutive issuances of equity securities and the incurrence of further debt.

Our compliance with regulations may limit our operations and future acquisitions.

We are also subject to laws and regulations, including those relating to antitrust, that could significantly affect our ability to expand our business through acquisitions or enter into joint ventures. For example, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice with respect to our domestic acquisitions and joint ventures, and the European Commission, the antitrust regulator of the European Union (the “E.U.”), with respect to our European acquisitions and joint ventures, have the authority to challenge our acquisitions and joint ventures on antitrust grounds before or after the acquisitions or joint ventures are completed. State agencies may also have standing to challenge these acquisitions and joint ventures under state or federal antitrust law. Comparable authorities in other foreign countries also have the ability to challenge our foreign acquisitions and joint ventures. Our failure to comply with all applicable laws and regulations could result in, among other things, regulatory actions or legal proceedings against us, the imposition of fines, penalties or judgments against us or significant limitations on our activities. Multiple or repeated failures by us to comply with these laws and regulations could result in increased fines, actions or legal proceedings against us. In addition, the regulatory environment in which we operate is subject to change. New or revised requirements imposed by governmental regulatory authorities could have adverse effects on us, including increased costs of compliance. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and regulations by these governmental authorities.

 

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We share control in joint venture projects, other investments and strategic alliances, which limits our ability to manage third-party risks associated with these projects.

We participate in a number of joint ventures, other non-controlling investments and strategic alliances and may enter into additional joint ventures, investments and strategic alliances in the future. In these joint ventures, investments and strategic alliances, we often have shared control over the operation of the assets and operations. As a result, such investments and strategic alliances may involve risks such as the possibility that a partner in an investment might become bankrupt, be unable to meet its capital contribution obligations, have economic or business interests or goals that are inconsistent with our business interests or goals, or take actions that are contrary to our instructions or to applicable laws and regulations. In addition, we may be unable to take action without the approval of our partners, or our partners could take binding actions without our consent. Consequently, actions by a partner or other third party could expose us to claims for damages, financial penalties and reputational harm, any of which could have an adverse effect on our business, financial condition and results of operations.

Preparing our financial statements requires us to have access to information regarding the results of operations, financial position and cash flows of our joint ventures and other investments. Any deficiencies in their internal controls over financial reporting may affect our ability to report our financial results accurately or prevent or detect fraud. Such deficiencies also could result in restatements of, or other adjustments to, our previously reported or announced operating results, which could diminish investor confidence and reduce the market price for our Class A common stock. Additionally, if our joint ventures and other investments are unable to provide this information for any meaningful period or fail to meet expected deadlines, we may be unable to satisfy our financial reporting obligations or timely file our periodic reports.

We may face labor shortages that could slow our growth.

The successful operation of our business depends upon our ability to attract, motivate and retain a sufficient number of qualified employees. Shortages of labor may make it increasingly difficult and expensive to attract, train and retain the services of a satisfactory number of qualified employees and could adversely impact our events and productions. Competition for qualified employees could require us to pay higher wages, which could result in higher labor costs and could have an adverse effect on our business, financial condition and results of operations.

We also rely on contingent workers and volunteers in order to staff our live events and productions, and our failure to manage our use of such workers effectively could adversely affect our business, financial condition and results of operations. We could potentially face various legal claims from contingent workers and volunteers in the future, including claims based on new laws or stemming from employees being misclassified. We may be subject to shortages, oversupply or fixed contractual terms relating to contingent workers. Our ability to manage the size of, and costs associated with, the contingent workforce may be subject to additional constraints imposed by local laws.

Our key personnel may be adversely impacted by immigration restrictions and related factors.

Our ability to retain our key personnel is impacted, at least in part, by the fact that a portion of our key personnel in the United States is comprised of foreign nationals who are not United States citizens. In order to be legally allowed to work in the United States, these individuals generally hold immigrant visas (which may or may not be tied to their employment with us) or green cards, the latter of which makes them permanent residents in the United States.

The ability of these foreign nationals to remain and work in the United States is impacted by a variety of laws and regulations, as well as the processing procedures of various government agencies. Changes in applicable laws, regulations or procedures could adversely affect our ability to hire or retain these key personnel and could affect our costs of doing business and our ability to deliver services to our clients. In addition, if the

 

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laws, rules or procedures governing the ability of foreign nationals to work in the United States were to change or if the number of visas available for foreign nationals permitted to work in the United States were to be reduced, our business could be adversely affected, if, for example, we were unable to retain an employee who is a foreign national.

The business of our agents and managers, and the clients we represent is international in nature and may require them to frequently travel or live abroad. The ability of our key personnel and talent to travel internationally for their work is impacted by a variety of laws and regulations, policy considerations of foreign governments, the processing procedures of various government agencies and geopolitical actions, including war and terrorism, or natural disasters including earthquakes, hurricanes, floods and fires. In addition, our productions and live events internationally subjects us to the numerous risks involved in foreign travel and operations and also subjects us to local norms and regulations, including regulations requiring us to obtain visas for our key personnel and, in some cases, hired talent. Actions by the clients we represent which are out of our control may also result in certain countries barring them from travelling internationally, which could adversely affect our business. If our key personnel and talent were prevented from conducting their work internationally for any reason, it could have an adverse effect on our business, financial condition and results of operations.

We rely on technology, such as our information systems, to conduct our business. Failure to protect our technology against breakdowns and security breaches could adversely affect our business.

We rely on technology, such as our information systems, content distribution systems, ticketing systems and payment processing systems, to conduct our business. This technology is vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners and vendors, or from attacks by malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” nation states and others. The techniques used to breach security safeguards evolve rapidly, and they may be difficult to detect for an extended period of time, and the measures we take to safeguard our technology may not adequately prevent such incidents.

While we have taken steps to protect our confidential and personal information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information. Such incidents could adversely affect our business operations, reputation and client relationships. Any such breach would require us to expend significant resources to mitigate the breach of security and to address matters related to any such breach, including the payment of fines. Although we maintain an insurance policy that covers data security, privacy liability and cyber attacks, our insurance may not be adequate to cover losses arising from breaches or attacks on our systems. We also may be required to notify regulators about any actual or perceived personal data breach as well as the individuals who are affected by the incident within strict time periods.

Furthermore, we have a large number of operating entities throughout the world and, therefore, operate on a largely decentralized basis. We are also in the process of integrating the technology of our acquired companies. The resulting size and diversity of our technology systems, as well as the systems of third party vendors with whom we contract, increase the vulnerability of such systems to breakdowns and security breaches. In addition, we rely on technology at live events, the failure or unavailability of which, for any significant period of time, could affect our business, our reputation and the success of our live events. Any significant interruption or failure of the technology upon which we rely or any significant breach of security could result in decreased performance and increased operating costs, causing our business to suffer, and could adversely affect our business, financial condition and results of operations.

In addition, our use of social media presents the potential for further vulnerabilities. For instance, we may be subject to boycotts, spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, DDOS attacks, password attacks, man-in-the-middle attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing and swatting. While we have internal

 

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policies in place to protect against these vulnerabilities, we can make no assurances that we will not be adversely affected should one of these events occur.

Unauthorized disclosure of sensitive or confidential client or customer information could harm our business and standing with our clients and customers.

The protection of our client, customer, employee and other company data is critical to us. We collect, store, transmit and use personal information relating to, among others, our clients, IMG Academy students, employees, consumers and event participants. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential client and customer information. Our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, payment card terminal tampering, computer viruses, misplaced, lost or stolen data, programming or human errors or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of client or customer information, whether by us or our third-party service providers, could damage our reputation, result in the loss of clients and customers, expose us to risk of litigation and liability or regulatory investigations or actions, disrupt our operations and harm our business. In addition, as a result of recent security breaches, the media and public scrutiny of information security and privacy has become more intense. As a result, we may incur significant costs to change our business practices or modify our service offerings in connection with the protection of personally identifiable information.

Regulatory action for alleged privacy violations could result in significant fines.

Regulators may impose significant fines for privacy and data protection violations. Our business operations involve the collection, transfer, use, disclosure, security and disposal of personal or sensitive information in various locations around the world, including the E.U. As a result, our business is subject to complex and evolving U.S. and international laws and regulations regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or otherwise harm our business. For example the E.U. adopted a new law governing data privacy called the General Data Protection Regulation (“GDPR”) that became effective in May 2018. The GDPR creates new requirements regarding personal information. Non-compliance with the GDPR carries significant monetary penalties of up to the higher of 4% of a company’s worldwide total revenue or €20 million. However, there can be no assurances that we will be successful in our efforts to comply with the GDPR or other privacy and data protection laws and regulations, or that violations will not occur, particularly given the complexity of both these laws and our business, as well as the uncertainties that accompany new laws. In addition, in June 2018, California passed the California Consumer Privacy Act of 2018, which will become operational on January 1, 2020 and imposes significant data privacy and potential statutory damages related to data protection for the data of California residents. It is likely that further amendments will be proposed to this legislation. The effects of this legislation potentially are far-reaching and may require us to modify our data processing practices and policies and to incur significant costs and expenses in an effort to comply.

We may be unable to protect our trademarks and other intellectual property rights, and others may allege that we infringe upon their intellectual property rights.

We have invested significant resources in brands associated with our business such as “Endeavor,” “WME,” “William Morris Endeavor,” “IMG” and “UFC” in an attempt to obtain and protect our public recognition. These brands are essential to our success and competitive position. We have also invested significant resources in the premium content that we produce.

Our trademarks and other intellectual property rights are critical to our success and our competitive position. Our intellectual property rights may be challenged and invalidated by third parties and may not be strong enough to provide meaningful commercial competitive advantage. If we fail to maintain our intellectual property, our competitors might be able to enter the market, which would harm our business. Further, policing unauthorized use and other violations of our intellectual property is difficult, particularly given our global scope, so we are

 

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susceptible to others infringing, diluting or misappropriating our intellectual property rights. If we are unable to maintain and protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete. In particular, the laws of certain foreign countries do not protect intellectual property rights in the same manner as do the laws of the United States and, accordingly, our intellectual property is at greater risk in those countries even where we take steps to protect such intellectual property. While we believe we have taken, and take in the ordinary course of business, appropriate available legal steps to reasonably protect our intellectual property, we cannot predict whether these steps will be adequate to prevent infringement or misappropriation of these rights.

From time to time, in the ordinary course of our business, we become involved in opposition and cancellation proceedings with respect to some of our intellectual property or third party intellectual property. Any opposition and cancellation proceedings or other litigation or dispute involving the scope or enforceability of our intellectual property rights or any allegation that we infringe, misappropriate or dilute upon the intellectual property rights of others, regardless of the merit of these claims, could be costly and time-consuming. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a third party with respect to a claim, or if we are required to, or decide to, cease use of a brand, rebrand or obtain non-infringing intellectual property (such as through a license), it could result in harm to our competitive position and could adversely affect our business and financial condition.

Through new and existing legal and illegal distribution channels, consumers have increasing options to access entertainment video. Piracy, in particular, threatens to damage our business. Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth. The success of our streaming video solutions (e.g. FIGHT PASS and PBR RidePass) is directly threatened by the availability and use of pirated alternatives. The value that streaming services are willing to pay for content that we develop may be reduced if piracy prevents these services from realizing adequate revenues on these acquisitions.

Lastly, in the event of a bankruptcy, our intellectual property licenses could be affected in numerous ways. There is a concern that a bankruptcy can result in us losing intellectual property rights. Although some protections are granted via the United States Bankruptcy Code, the United States Bankruptcy Code definition of intellectual property only includes trade secrets, patents and patent applications, copyrights, and mask works and does not include trademarks. Because we rely heavily on the licensing of trademarks, we are at risk of losing rights in the event of a bankruptcy.

As a result of our operations in international markets, we are subject to risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to such markets.

We provide services in various jurisdictions abroad through a number of brands and businesses that we own and operate, as well as through joint ventures, and we expect to continue to expand our international presence. We face, and expect to continue to face, additional risks in the case of our existing and future international operations, including:

 

   

political instability, adverse changes in diplomatic relations and unfavorable economic conditions in the markets in which we have international operations or into which we may expand;

 

   

more restrictive or otherwise unfavorable government regulation of the entertainment and sports industry, which could result in increased compliance costs or otherwise restrict the manner in which we provide services and the amount of related fees charged for such services;

 

   

limitations on the enforcement of intellectual property rights;

 

   

enhanced difficulties of integrating any foreign acquisitions;

 

   

limitations on the ability of foreign subsidiaries to repatriate profits or otherwise remit earnings;

 

   

adverse tax consequences;

 

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less sophisticated legal systems in some foreign countries, which could impair our ability to enforce our contractual rights in those countries;

 

   

limitations on technology infrastructure;

 

   

variability in venue security standards and accepted practices; and

 

   

difficulties in managing operations due to distance, language and cultural differences, including issues associated with (i) business practices and customs that are common in certain foreign countries but might be prohibited by U.S. law and our internal policies and procedures and (ii) management and operational systems and infrastructures, including internal financial control and reporting systems and functions, staffing and managing of foreign operations, which we might not be able to do effectively or on a cost-efficient basis.

Exchange rates may cause fluctuations in our results of operations.

Because we own assets overseas and derive revenues from our international operations, we may incur currency translation losses or gains due to changes in the values of foreign currencies relative to the U.S. Dollar. We cannot, however, predict the effect of exchange rate fluctuations upon future operating results. Although we cannot predict the future relationship between the U.S. Dollar and the currencies used by our international businesses, principally the British Pound and the Euro, we experienced a foreign exchange rate net loss of $7.6 million for the year ended December 31, 2018. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”

Participants and spectators in connection with our live entertainment and sports events are subject to potential injuries and accidents, which could subject us to personal injury or other claims and increase our expenses, as well as reduce attendance at our live entertainment and sports events, causing a decrease in our revenue.

There are inherent risks to participants and spectators involved with producing, attending or participating in live entertainment and sports events. Injuries and accidents have occurred and may occur from time to time in the future, which could subject us to substantial claims and liabilities for injuries. Incidents in connection with our entertainment and sports events at any of our venues or venues that we rent could also result in claims, reducing operating income or reducing attendance at our events, causing a decrease in our revenues. There can be no assurance that the insurance we maintain will be adequate to cover any potential losses. The physical nature of many of our live sports events exposes the athletes that participate to the risk of serious injury or death. These injuries could include concussions, and many sports leagues and organizations have been sued by athletes over alleged long-term neurocognitive impairment arising from concussions. Although the participants in certain of our live sports events, as independent contractors, are responsible for maintaining their own health, disability and life insurance, we may seek coverage under our accident insurance policies, if available, or our general liability insurance policies, for injuries that our athletes incur while competing. To the extent such injuries are not covered by our policies, we may self-insure medical costs for our athletes for such injuries. Liability to us resulting from any death or serious injury, including concussions, sustained by athletes while competing, to the extent not covered by our insurance, could adversely affect our business, financial condition and operating results.

Costs associated with, and our ability to, obtain insurance could adversely affect our business.

Heightened concerns and challenges regarding property, casualty, liability, business interruption, cancellation and other insurance coverage have resulted from terrorist and related security incidents along with varying weather-related conditions and incidents. As a result, we may experience increased difficulty obtaining high policy limits of coverage at a reasonable cost and with reasonable deductibles, including coverage for acts of terrorism and weather-related property damage. We cannot assure you that future increases in insurance costs and difficulties obtaining high policy limits and reasonable deductibles will not adversely impact our

 

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profitability, thereby possibly impacting our operating results and growth. We have a significant investment in property and equipment at each of our venues, which are generally located near major cities and which hold events typically attended by a large number of people.

We cannot assure you that our insurance policy coverage limits, including insurance coverage for property, casualty, liability and business interruption losses and acts of terrorism, would be adequate should one or multiple adverse events occur, or that our insurers would have adequate financial resources to sufficiently or fully pay our related claims or damages. We cannot assure you that adequate coverage limits will be available, offered at a reasonable cost, or offered by insurers with sufficient financial soundness. The occurrence of such an incident or incidents affecting any one or more of our venues could have an adverse effect on our financial position and future results of operations if asset damage or company liability were to exceed insurance coverage limits or if an insurer were unable to sufficiently or fully pay our related claims or damages.

We are subject to extensive U.S. and foreign governmental regulations, and our failure to comply with these regulations could adversely affect our business.

Our operations are subject to federal, state and local laws, statutes, rules, regulations, policies and procedures in the United States and around the world, which are subject to change at any time, governing matters such as:

 

   

licensing laws for talent agencies, such as California’s Talent Agencies Act;

 

   

licensing laws for the promotion and operation of MMA events;

 

   

licensing, permitting and zoning requirements for operation of our offices, locations, venues and other facilities;

 

   

health, safety and sanitation requirements;

 

   

the service of food and alcoholic beverages;

 

   

the welfare and protection of animals;

 

   

working conditions, labor, minimum wage and hour, citizenship, immigration, visas, harassment and discrimination, and other labor and employment laws and regulations;

 

   

human rights and human trafficking, including compliance with the U.K. Modern Slavery Act and similar current and future legislation;

 

   

our employment of youth workers and compliance with child labor laws;

 

   

compliance with the U.S. Americans with Disabilities Act of 1990 and the U.K.’s Disability Discrimination Act 1995;

 

   

compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act 2010 (the “Bribery Act”) and similar regulations in other countries, which prohibit U.S. companies and their intermediaries from engaging in bribery or other prohibited payments to foreign officials and require companies to keep books and records that accurately and fairly reflect the transactions of the company and to maintain an adequate system of internal accounting controls;

 

   

compliance with applicable antitrust and fair competition laws;

 

   

compliance with international trade controls, including applicable import/export regulations, and sanctions and international embargoes that may limit or restrict our ability to do business with specific individuals or entities or in specific countries or territories;

 

   

compliance with anti-money laundering and countering terrorist financing rules, currency control regulations, and statutes prohibiting tax evasion and the aiding or abetting of tax evasion;

 

   

marketing activities;

 

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environmental protection regulations;

 

   

compliance with current and future privacy and data protection laws imposing requirements for the processing and protection of personal or sensitive information, including the GDPR and the E.U. e-Privacy Regulation;

 

   

compliance with cybersecurity laws imposing country-specific requirements relating to information systems and network design, security, operations, and use;

 

   

tax laws; and

 

   

imposition by foreign countries of trade restrictions, restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or currency exchange controls.

Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, reputational harm, adverse media coverage, and other collateral consequences. Multiple or repeated failures by us to comply with these laws and regulations could result in increased fines or proceedings against us. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations and financial condition. While we attempt to conduct our business and operations in a manner that we believe to be in compliance with such laws and regulations, there can be no assurance that a law or regulation will not be interpreted or enforced in a manner contrary to our current understanding. In addition, the promulgation of new laws, rules and regulations could restrict or unfavorably impact our business, which could decrease demand for our services, reduce revenue, increase costs or subject us to additional liabilities. For example, some legislatures have proposed laws in the past that would impose potential liability on us and other promoters and producers of live events for incidents that occur at our events, particularly relating to drugs and alcohol.

In some United States and foreign jurisdictions, we may have direct and indirect interactions with government agencies and state-affiliated entities in the ordinary course of our business. In particular, athletic commissions and other applicable regulatory agencies require us to obtain licenses for promoters, medical clearances or other permits or licenses for athletes or permits for events in order for us to promote and conduct our live events and productions. In the event that we fail to comply with the regulations of a particular jurisdiction, whether through our acts or omissions or those of third parties, we may be prohibited from promoting and conducting our live events and productions in that jurisdiction. The inability to present our live events and productions in jurisdictions could lead to a decline in various revenue streams in such jurisdictions, which could have an adverse effect on our business, financial condition and results of operations.

We operate in a number of countries which are considered to be at a heightened risk for corruption. Additionally, we operate in industry segments, such as sports marketing, that have been the subject of past anti-corruption enforcement efforts. As a global company, a risk exists that our employees, contractors, agents or managers could engage in business practices prohibited by applicable U.S. laws and regulations, such as the FCPA, as well as the laws and regulations of other countries prohibiting corrupt payments to government officials and others, such as the Bribery Act. There can be no guarantee that our compliance programs will prevent corrupt business practices by one or more of our employees, contractors, agents, managers or vendors, or that regulators in the U.S. or in other markets will view our program as adequate should any such issue arise.

We are also required to comply with economic sanctions laws imposed by the United States or by other jurisdictions where we do business, which may restrict our transactions in certain markets, and with certain customers, business partners and other persons and entities. As a result, we are not permitted to, directly or indirectly (including through a third party intermediary), procure goods, services, or technology from, or engage

 

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in transactions with, individuals and entities subject to sanctions. While we believe we have been in compliance with sanctions requirements, there can be no guarantee that we will remain in compliance. Any violation of corruption or sanctions laws could result in fines, civil and criminal sanctions against us or our employees, prohibitions on the conduct of our business (e.g., debarment from doing business with International Development Banks and similar organizations) and damage to our reputation, which could have an adverse effect on our business, financial condition and results of operations. Any violation of corruption or sanctions laws could result in fines, civil, criminal sanctions against us or our employees, prohibitions on the conduct of our business (e.g., debarment from doing business with International Development Banks and similar organizations) and damage to our reputation, which could have an adverse effect on our business, financial condition and results of operations.

In addition, in June 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the E.U., commonly referred to as “Brexit.” Subsequently, in March 2017, the United Kingdom’s government invoked Article 50 of the Treaty on European Union, which formally triggered the two-year negotiation process to exit the E.U. Negotiations to determine the United Kingdom’s future relationship with the E.U., including terms of trade, are complex and there can be no assurance regarding the terms or timing of any such arrangements. A withdrawal could significantly disrupt the free movement of goods, services and people between the United Kingdom and the E.U., and result in increased legal and regulatory complexities, potential higher costs of conducting business in Europe as well as less demand for concerts and other live entertainment in the United Kingdom and the E.U. Brexit has also contributed to significant volatility and uncertainty in global stock markets and currency exchange rates, and such volatility could continue to occur as the negotiation process progresses. While the full parameters and implications of Brexit are currently unknown, any of these effects could have an adverse effect on our business, financial condition and results of operations.

We are signatory to certain franchise agreements of unions and guilds and are subject to certain licensing requirements of the states in which we operate. We are also signatories to certain collective bargaining agreements and depend upon unionized labor for the provision of some of our services. Our clients are also members of certain unions and guilds that are signatories to collective bargaining agreements. Any expiration, termination, revocation or non-renewal of these franchises, collective bargaining agreements, or licenses and any work stoppages or labor disturbances could adversely affect our business.

Certain of our business, clients, or employees at some of the locations in which we operate are subject to collective bargaining and/or franchise agreements. These collective bargaining and/or franchise agreements regularly expire and require negotiation in the ordinary course of business. Upon the expiration of any of these collective bargaining and/or franchise agreements, however, we, the trade associations with which we are affiliated, and/or our clients’ unions may be unable to negotiate new collective bargaining and/or franchise agreements on satisfactory terms or at all, and our operations may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating. Certain of such unions and guilds have in the past gone on strike, and in the future may do so again. In addition, our operations at one or more of our facilities may also be interrupted as a result of labor disputes by outside unions attempting to unionize one or more groups of employees (even if not employed by us) at a venue even though we do not currently have unionized labor at that venue. There have also been efforts to unionize the MMA athletes that participate in UFC’s events. A work stoppage at one or more of our operated venues or at our promoted events could have an adverse effect on our business, financial condition and results of operations. We cannot predict the effect that a potential work stoppage would have on our business.

We are party to certain collective bargaining agreements that require contributions to various multiemployer pension, health and welfare plans that cover unionized employees. Required contributions to these plans could unexpectedly increase during the term of a collective bargaining agreement due to the Employee Retirement Income Security Act of 1974, as amended, which requires additional contributions to be made when a pension fund enters into critical status, which may occur for reasons that are beyond our control. In addition, we may be required by law to fulfill our pension withdrawal liability with respect to any multiemployer pension plans from which we may withdraw or partially withdraw. Our potential withdrawal liability will increase if a multiemployer pension plan in which we participate has significant underfunded liabilities. Any unplanned multiemployer pension liabilities could have an adverse effect on our business, financial condition and results of operations.

 

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Our talent agency business is and was signatory, through a trade association, The Association of Talent Agents (“ATA”), to certain franchise agreements with the unions and guilds that represent certain of its clients. The agency is also subject to licensing and other requirements of certain states in which we operate. Our ability to maintain, renew or operate without such licenses and franchises is not guaranteed. For example, one such guild, the Writers Guild of America (“WGA”), has recently terminated its existing franchise agreement, the Artists’ Manager Basic Agreement, with the ATA. The termination became effective April 6, 2019. In the absence of a new, negotiated agreement, the WGA unilaterally implemented a Code of Conduct (the “Code of Conduct”) that includes terms that effectively prohibit packaging deals by agencies and prohibit ATA members or their affiliated companies from producing content. WME has not signed the Code of Conduct. The WGA has instructed its members to terminate writing representation services of any agency (including WME) that has not signed the Code of Conduct and as a result, the agency has received termination letters from a majority of its writer clients for the commissioning of writing representation services (for clarity, notwithstanding such terminations, the Company continues to represent more than 6,000 clients as of the date of this prospectus). The duration of the dispute between WGA and the ATA (including WME) is unknown. Furthermore, the WGA and certain writers have recently filed a lawsuit in state court in California against WME and other talent agencies alleging, among other things, breach of fiduciary duty and unfair competition under California law based on the same issues underlying the WGA’s dispute with the ATA, including the use of packaging deals and connections to affiliate producers. In addition, on June 24, 2019, WME filed a lawsuit in federal court in California against the WGA alleging violations of Section 1 of the Sherman Act. In August 2019, the WGA voluntarily dismissed its state court lawsuit against WME and other talent agencies and instead refiled the claims in that lawsuit as counterclaims to the action brought against it by WME in federal court. The WGA asserts counterclaims of breach of fiduciary duty, unfair competition, violations of Section 1 of the Sherman Act, violations of the California Cartwright Act and RICO, among others. On September 13, 2019, the judge ordered the case to be consolidated with cases brought by United Talent Agency and Creative Artists Agency. The outcome of the dispute, including the commercial landscape that will exist in the future between writers and agents, could have an adverse effect on our business. As with the WGA dispute, any revocation, non-renewal or termination of our or our clients’ franchises or licenses, including but not limited to the Artists’ Manager Basic Agreement, any change in our client representation business’ ability to generate new future packaging revenues or its ability to affiliate with other Endeavor companies that produce content, or any disputed application of, or unexpected change in franchise or licensing requirements (whether applicable to us, our clients or otherwise), could have an adverse effect on our business, financial condition and results of operations.

We cannot be certain that additional financing will be available on reasonable terms when required, or at all.

From time to time, we may need additional financing, whether in connection with our capital improvements, acquisitions or otherwise. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets and other factors. If borrowings available under our first lien credit agreement entered into by certain of our subsidiaries in May 2014 in connection with the acquisition of IMG (as amended, restated, modified and/or supplemented from time to time, the “2014 Credit Facilities”) and UFC Parent’s term loan and revolving credit facilities (the “UFC Credit Facilities” and collectively with the 2014 Credit Facilities, the “Senior Credit Facilities”) are insufficient, we may be required to adopt one or more alternatives to raise cash, such as incurring additional indebtedness, selling our assets, seeking to raise additional equity capital or restructuring, which alternatives may not be available to us on favorable terms when required, or at all. Any of the foregoing could have a material adverse effect on our business. In addition, if we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and our then existing stockholders may experience dilution.

Unfavorable outcomes in legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation. Unfavorable rulings in our legal proceedings could result in material liability to us or have a negative impact on our reputation or relations with our employees or third parties. The outcome of litigation, including class action lawsuits, is difficult to

 

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assess or quantify. Plaintiffs in class action lawsuits may seek recovery of very large or indeterminate amounts and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. UFC is currently named in five related class-action lawsuits filed against it alleging that UFC violated Section 2 of the Sherman Antitrust Act of 1890 by monopolizing the alleged market for elite professional MMA athletes’ services. Additionally, IMG is currently named in three claims against it in Milan, Italy alleging anti-competitive practices. See “Business—Legal Proceedings.” If we are unable to resolve these or other matters favorably, our business, operating results and our financial condition may be adversely affected.

In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal) or lawsuits by governmental agencies or private parties. If the results of these investigations, proceedings or suits are unfavorable to us or if we are unable to successfully defend against third-party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions or other censure that could have an adverse effect on our business, financial condition and results of operations. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could have an adverse effect on our business, results of operations and financial condition.

Risks Related to Our Organization and Structure

We are a holding company and our principal asset after completion of this offering will be our indirect equity interests in Endeavor Operating Company, and accordingly we are dependent upon distributions from Endeavor Operating Company to pay taxes and other expenses.

We are a holding company and, upon completion of the reorganization transactions and this offering, our principal asset will be our indirect ownership of Endeavor Operating Company. See “Organizational Structure.” We have no independent means of generating revenue. As the indirect sole managing member of Endeavor Operating Company, we intend to cause Endeavor Operating Company to make distributions to its equityholders, including the members of Endeavor Operating Company (including Endeavor Profits Units holders) and Endeavor Manager, in amounts sufficient to cover the taxes on their allocable share of the taxable income of Endeavor Operating Company. As the sole managing member of Endeavor Manager, we intend to cause Endeavor Manager, to the extent it is able, to make non-pro rata distributions to us such that we will be able to cover all applicable taxes payable by us, any payments we are obligated to make under the tax receivable agreement we intend to enter into as part of the reorganization transactions and other costs or expenses, but we will be limited in our ability to cause Endeavor Operating Company to make distributions to its equityholders (including for purposes of paying corporate and other overhead expenses and dividends) under the Senior Credit Facilities. In addition, certain laws and regulations may result in restrictions on Endeavor Manager’s ability to make distributions to us, Endeavor Operating Company’s ability to make distributions to its equityholders, or the ability of Endeavor Operating Company’s subsidiaries to make distributions to it.

To the extent that we need funds and Endeavor Manager, Endeavor Operating Company or Endeavor Operating Company’s subsidiaries are restricted from making such distributions, under applicable law or regulation, as a result of covenants in the Senior Credit Facilities or otherwise, we may not be able to obtain such funds on terms acceptable to us or at all and as a result could suffer an adverse effect on our liquidity and financial condition. In situations where Endeavor Operating Company does not have sufficient cash to make tax distributions to all of its members in the full amount provided for in the Endeavor Operating Company Agreement, tax distributions made to Endeavor Manager will be reduced (relative to those tax distributions made to other members of Endeavor Operating Company) to reflect the income tax rates to which Endeavor Manager and Endeavor Group Holdings are subject and certain other factors (with the amount of such reduction being paid to the other members of Endeavor Operating Company as tax distributions). Tax distributions will generally be treated as advances of other distributions made under the Endeavor Operating Company Agreement.

Under the limited liability company agreement of Endeavor Operating Company (the “Endeavor Operating Company Agreement”), we expect Endeavor Operating Company, from time to time, to make distributions in

 

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cash to its equityholders, including the members of Endeavor Operating Company (including the Endeavor Profits Units holders) and Endeavor Manager, in amounts sufficient to cover the taxes on their allocable share of the taxable income of Endeavor Operating Company. We further expect that, under the limited liability company agreement of Endeavor Manager (the “Endeavor Manager LLC Agreement”), Endeavor Manager may make non-pro rata distributions in cash to us using the proceeds it receives from any such tax distributions by Endeavor Operating Company. As a result of (i) potential differences in the amount of net taxable income indirectly allocable to us and to Endeavor Operating Company’s other equityholders, (ii) the lower tax rate applicable to corporations as opposed to individuals and (iii) the favorable tax benefits that we anticipate from (a) future redemptions or exchanges of Endeavor Operating Company Units (and paired shares of Class X common stock), in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, (b) payments under the tax receivable agreement and (c) the acquisition of interests in Endeavor Operating Company from its equityholders (other than Endeavor Group Holdings and Endeavor Manager), we expect that these tax distributions may be in amounts that exceed our tax liabilities. Our board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, the payment of obligations under the tax receivable agreement and the payment of other expenses. We will have no obligation to distribute such cash (or other available cash) to our stockholders. No adjustments to the exchange ratio for Endeavor Operating Company Units or Endeavor Manager Units and corresponding shares of common stock will be made as a result of any cash distribution by us or any retention of cash by us. To the extent we do not distribute such cash as dividends on our Class A common stock and instead, for example, hold such cash balances, or lend them to Endeavor Operating Company, this may result in shares of our Class A common stock increasing in value relative to the value of Endeavor Operating Company Units. The holders of Endeavor Operating Company Units may benefit from any value attributable to such cash balances if they acquire shares of Class A common stock in exchange for their Endeavor Operating Company Units (and paired shares of Class X common stock).

We are controlled by Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders, whose interests in our business may be different than yours, and our board of directors has delegated significant authority to an Executive Committee and to Messrs. Emanuel and Whitesell.

Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will, as a group, control approximately 88.7% of the combined voting power of our common stock (or 88.6% if the underwriters exercise their option to purchase additional shares in full) after the completion of this offering and the application of the net proceeds from this offering as a result of their ownership of shares of our Class A common stock and Class X common stock, each share of which is entitled to 1 vote on all matters submitted to a vote of our stockholders, and Class Y common stock, each share of which is entitled to 20 votes on all matters submitted to a vote of our stockholders.

Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will collectively have the ability to substantially control our Company, including the ability to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and stockholder amendments to our by-laws and the approval of any merger or sale of substantially all of our assets. This concentration of ownership and voting power may also delay, defer or even prevent an acquisition by a third party or other change of control of our Company and may make some transactions more difficult or impossible without the support of Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders, even if such events are in the best interests of minority stockholders. This concentration of voting power with Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders may have a negative impact on the price of our Class A common stock. In addition, because shares of our Class Y common stock each have 20 votes per share on matters submitted to a vote of our stockholders, Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will be able to control our Company as long as they own Class Y common stock representing more than a majority of the total voting power of our issued and outstanding common stock, voting together as a single class. Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will continue to control the outcome of matters submitted to stockholders so long as they collectively hold 89,993,773 shares of Class Y common stock, which represents 21.0% of the outstanding shares of

 

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all our common stock outstanding upon the closing of this offering. Holders of Class Y common stock would continue to control the outcome of matters submitted to stockholders where Class Y common stock represents 21.0% of the outstanding shares of all our common stock.

Additionally, prior to a Triggering Event, pursuant to Section 141(a) of the Delaware General Corporation Law (“DGCL”), the Executive Committee will have all of the power and authority (including voting power) of the board of directors. The Executive Committee will have the authority to approve any actions of the Company, except for matters that must be approved by the Audit Committee of the board (or both the Executive Committee and the Audit Committee), or by a committee qualified to grant equity to persons subject to Section 16 of the Exchange Act for purposes of exempting transactions pursuant to Section 16b-3 thereunder, or as required under Delaware law, SEC rules and the rules of the Exchange. The Executive Committee will consist of Messrs. Emanuel and Whitesell and two directors nominated to our board of directors by the Silver Lake Equityholders. The Executive Committee will further delegate to Messrs. Emanuel and Whitesell the authority to manage the business of the Company with power and authority to approve any actions of the Company, except for certain specified actions that require the approval of the Executive Committee and as required under Delaware law, SEC rules and the rules of the Exchange. See “Management—Structure of the Board of Directors.”

Messrs. Emanuel’s and Whitesell’s, Executive Holdcos’ and the Silver Lake Equityholders’ interests may not be fully aligned with yours, which could lead to actions that are not in your best interest. Because Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders hold part of their economic interest in our business through Endeavor Operating Company, rather than through the public company, they may have conflicting interests with holders of shares of our Class A common stock. For example, Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders may have different tax positions from us, which could influence their decisions regarding whether and when we should dispose of assets or incur new or refinance existing indebtedness, and whether and when we should undergo certain changes of control within the meaning of the tax receivable agreement or terminate the tax receivable agreement. In addition, the structuring of future transactions may take into consideration these tax or other considerations even where no similar benefit would accrue to us. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.” Messrs. Emanuel’s and Whitesell’s, Executive Holdcos’ and the Silver Lake Equityholders’ significant ownership in us and resulting ability to effectively control us may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over the then-current market price.

Section 203 of the DGCL may affect the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation. We have elected in our amended and restated certificate of incorporation not to be subject to Section 203 of the DGCL. Nevertheless, our amended and restated certificate of incorporation will contain provisions that will become operative following a Triggering Event and that will have a similar effect to Section 203 of the DGCL, except that they provide that Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders and their respective affiliates and direct and indirect transferees will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions.

Our amended certificate of incorporation will provide that, to the fullest extent permitted by law, Endeavor Group Holdings renounces any interest or expectancy in a transaction or matter that may be a corporate opportunity for Endeavor Group Holdings and Messrs. Emanuel and Whitesell (other than in their capacity as officers and employees of the Company), Executive Holdcos, the Silver Lake Equityholders, or any of our non-employee directors have no duty to present such corporate opportunity to Endeavor Group Holdings and they may invest in competing businesses or do business with our clients or customers. To the extent that Messrs. Emanuel and Whitesell, Executive Holdcos, the Silver Lake Equityholders, or our non-employee directors invest in other businesses, they may have differing interests than our other stockholders. In addition, we may in the

 

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future partner with or enter into transactions with our pre-IPO investors or their affiliates, including with respect to future investments, acquisitions and dispositions.

For additional information regarding the share ownership of, and our relationship with, the Silver Lake Equityholders, you should read the information under the headings “Principal Stockholders” and “Certain Relationships and Related Party Transactions.”

We cannot predict the impact our capital structure and the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders may have on our stock price or our business.

We cannot predict whether our multiple share class capital structure, combined with the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders, will result in a lower trading price or greater fluctuations in the trading price of our Class A common stock, or will result in adverse publicity or other adverse consequences. In addition, some indexes are considering whether to exclude companies with multiple share classes from their membership. For example, in July 2017, FTSE Russell, a provider of widely followed stock indexes, stated that it plans to require new constituents of its indexes to have at least five percent of their voting rights in the hands of public stockholders. In addition, in July 2017, S&P Dow Jones, another provider of widely followed stock indexes, stated that companies with multiple share classes will not be eligible for certain of their indexes. As a result, our Class A common stock will likely not be eligible for these stock indexes. We cannot assure you that other stock indexes will not take a similar approach to FTSE Russell or S&P Dow Jones in the future. Exclusion from indexes could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.

Our control of UFC is subject to certain consent rights held by other equityholders of UFC, whose interests in UFC may be different than ours and yours, and the terms of the preferred units issued as partial financing for the UFC Acquisition contain negative covenants that may limit our ability to pursue our business strategies with respect to UFC.

The Second Amended and Restated Limited Liability Company Agreement of UFC Parent, dated as of August 18, 2016 (the “UFC LLC Agreement”), which governs the ownership of UFC, contains certain rights designed to protect Silver Lake Partners and KKR from a substantial change in operations that are outside the ordinary course of business. These rights include:

 

   

the right to consent to UFC’s incurrence of indebtedness in excess of $50 million in a single transaction or in excess of $150 million over three years;

 

   

issuance of equity securities, redemptions or repurchases of equity securities, liquidation or dissolution, distributions in respect of membership interests, acquisitions or sales of any business for consideration in excess of $50 million in a single transaction or in excess of $150 million over three years;

 

   

incurrence of operating expenses or capital expenditures in a fiscal year in excess of 132.5% and 150%, respectively, of the amount of operating expenses or capital expenditures incurred in the preceding fiscal year;

 

   

settlement of any suit, action or legal proceeding requiring payments in excess of $20 million or imposing a material limitation or obligation on UFC; and

 

   

any related party transaction and any material changes to the nature of the business, taken as a whole.

While not participatory in nature, these rights held by the other owners of UFC limit our ability to make unilateral decisions about the management and operation of UFC without the approval of its other owners, whose interests may not be fully aligned with ours and yours, which could lead to actions that are not in our and your best interest.

In addition, the UFC LLC Agreement also contains provisions relating to an initial public offering of UFC, which provide that (i) prior to February 18, 2019, an initial public offering of UFC may be requested or approved by at least one director designated by each of us, Silver Lake Partners and KKR, (ii) after February 18, 2019 but

 

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prior to August 18, 2021, an initial public offering of UFC may be requested or approved by at least one director designated by each of us, Silver Lake Partners and KKR, provided that a request or approval by any two of the directors designated by each of us, Silver Lake Partners and KKR is required if the valuation in the offering achieves a specified valuation, and provided further that the approval of the director designated by us is required under all circumstances prior to August 18, 2021, so long as we hold a majority of the equity entitled to appoint directors of UFC, and (iii) after August 18, 2021, any of us, Silver Lake Partners or KKR, subject to certain ownership requirements, may exercise a demand right with respect to an initial public offering without approval by us or our director designees. Any initial public offering undertaken pursuant to the UFC LLC Agreement must be completed in accordance with the agreement and could be dilutive to our ownership position in UFC. The demand rights granted pursuant to the UFC LLC Agreement may require UFC to undertake an initial public offering at a time or on terms that are not in your best interests, and such a transaction could adversely affect the value of our investment in UFC.

The terms of the preferred units issued by UFC to affiliates of MSD Capital, L.P. as partial financing for the UFC Acquisition limit, among other things, UFC’s ability to issue dividends, repurchase or redeem equity, make certain restricted payments, issue preferred equity, incur indebtedness and enter into affiliate transactions. The terms of such preferred units also contain certain events of default. Our ability to comply with these covenants is subject to certain events outside of our control. If we are unable to comply with these covenants, the holders of such preferred units could elect to increase the applicable distribution rate on such preferred units.

We have a substantial amount of indebtedness, which could adversely affect our business.

As of June 30, 2019, we had an aggregate of $4.5 billion outstanding indebtedness under our Senior Credit Facilities, with the ability to borrow up to $328.7 million more under revolving credit facilities under our Senior Credit Facilities.

If we cannot generate sufficient cash flow from operations to service this debt, we may need to refinance this debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.

This substantial amount of indebtedness could:

 

   

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures or other purposes;

 

   

require us to refinance in order to accommodate the maturity of the term loans under our 2014 Credit Facilities in 2025 and the term loans under our UFC Credit Facilities in 2026;

 

   

increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have proportionately less indebtedness;

 

   

increase our cost of borrowing and cause us to incur substantial fees from time to time in connection with debt amendments or refinancings; and

 

   

limit our ability to obtain necessary additional financing for working capital, capital expenditures or other purposes in the future, plan for or react to changes in our business and the industries in which we operate, make future acquisitions or pursue other business opportunities and react in an extended economic downturn.

Despite this substantial indebtedness, we may still be able to incur significantly more debt. The incurrence of additional debt could increase the risks associated with this substantial leverage, including our ability to service this indebtedness. For example, the incurrence of $465 million of incremental first lien term loans under our UFC Credit Facilities to finance our Preferred Equity Redemption is anticipated to result in S&P lowering the term loan issue level rating one notch to match the corporate credit rating at UFC Holdings, LLC. See “Prospectus Summary—Recent Developments.” In addition, because a portion of the borrowings under our credit facilities bear interest at a variable rate, our interest expense could increase, exacerbating these risks. Of the

 

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aggregate principal balance of $4,504 million outstanding under the Senior Credit Facilities as of June 30, 2019, $1,500 million has been fixed through interest rate swaps leaving $3,004 million of floating rate debt under those facilities. A 1% increase in the interest rates charged on the outstanding amount of our floating rate debt would increase our annual interest expense by $30.3 million.

Restrictive covenants in the Senior Credit Facilities may restrict our ability to pursue our business strategies.

The credit agreements governing the terms of the Senior Credit Facilities restrict, among other things, asset dispositions, mergers and acquisitions, dividends, stock repurchases and redemptions, other restricted payments, indebtedness, loans and investments, liens and affiliate transactions. The Senior Credit Facilities also contain customary events of default, including a change in control. These covenants, among other things, limit our ability to fund future working capital needs and capital expenditures, engage in future acquisitions or development activities, or otherwise realize the value of our assets and opportunities fully. Such covenants could limit the flexibility of our subsidiaries in planning for, or reacting to, changes in the entertainment and sports industry. Our ability to comply with these covenants is subject to certain events outside of our control. If we are unable to comply with these covenants, the lenders under the Senior Credit Facilities could terminate their commitments and accelerate repayment of our outstanding borrowings, which also may result in the acceleration of or default under any other debt we may incur in the future to which a cross-acceleration or cross-default provision applies. If such an acceleration were to occur, we may be unable to obtain adequate refinancing for our outstanding borrowings on favorable terms, or at all. We have pledged a significant portion of our assets as collateral under our Senior Credit Facilities. If we are unable to repay our outstanding borrowings when due, the lenders under the Senior Credit Facilities will also have the right to proceed against the collateral granted to them to secure the indebtedness owed to them, which may have an adverse effect on our business, financial condition and operating results.

We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.

Our ability to make payments on, or to refinance our respective obligations under, our indebtedness will depend on future operating performance and on economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. Additionally, the terms of the UFC Credit Facilities and the preferred units issued by UFC Parent restrict the ability of our UFC subsidiaries to make dividends to us, which may limit us from using funds from our UFC subsidiaries to make payments on our indebtedness under the 2014 Credit Facilities. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our respective obligations under our indebtedness or to fund our other needs. In order for us to satisfy our obligations under our indebtedness, we must continue to execute our business strategy. If we are unable to do so, we may need to refinance all or a portion of our indebtedness on or before maturity.

We will be exempt from certain corporate governance requirements since we will be a “controlled company” within the meaning of the Exchange rules, and as a result our stockholders will not have the protections afforded by these corporate governance requirements.

Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders will control, as a group, more than 50% of our combined voting power upon the completion of this offering. As a result, we will be considered a “controlled company” for the purposes of the Exchange rules and corporate governance standards, and therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements of the Exchange, including those that would otherwise require our board of directors to have a majority of independent directors and require that we either establish Compensation and Nominating and Corporate Governance Committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of our executive officers and nominees for directors are determined or recommended to the board of directors by the independent members of the board of directors. Accordingly, holders of our Class A common stock will not have the same protections afforded to stockholders of companies that are subject to all of the rules and corporate governance standards of the Exchange, and the ability of our independent directors to

 

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influence our business policies and affairs may be reduced. We expect to remain a controlled company until Messrs. Emanuel and Whitesell, Executive Holdcos and the Silver Lake Equityholders no longer control, as a group, more than 50% of our combined voting power. Each member of our control group holds Class A common stock and Class X common stock, each of which has 1 vote per share, and Class Y common stock, which has a 20-vote per share feature. See “Management—Controlled Company.” The shares of Class Y common stock held by our control group will be canceled/redeemed for no consideration upon the earlier of (i) the disposition of (a) the paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) and (b) the shares of Class A common stock (as a result of a redemption of paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) paired with such Class Y common stock, as applicable, and (ii) with respect to all shares of Class Y common stock, a Triggering Event. Because there is no time-based sunset date for our Class Y common stock, we may continue to be a controlled company indefinitely.

We will be required to pay certain of our pre-IPO investors for certain tax benefits we may claim (or are deemed to realize) in the future, and the amounts we may pay could be significant.

In connection with the reorganization transactions, we will acquire existing equity interests in Endeavor Operating Company from certain of our pre-IPO investors in the mergers described in “Organizational Structure—Reorganization Transactions—Pre-IPO Investors Mergers” in exchange for the issuance of shares of our Class A common stock, Class Y common stock and rights to receive payments under the tax receivable agreement. As a result of these acquisitions, we will succeed to certain tax attributes of certain of our pre-IPO investors and will receive the benefit of tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries. In addition, future redemptions or exchanges of Endeavor Operating Company Units from members of Endeavor Operating Company (other than Endeavor Manager) in exchange for shares of our Class A common stock or cash are expected to produce favorable tax attributes that would not be available to us in the absence of such redemptions or exchanges.

We intend to enter into the tax receivable agreement with the Post-IPO TRA Holders that will provide for the payment by us to the Post-IPO TRA Holders (or their transferees of Endeavor Operating Company Units or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we realize or are deemed to realize (determined by using assumptions regarding combined state and local income tax rates) as a result of (i) any tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries resulting from (a) the acquisition of equity interests in Endeavor Operating Company from certain of our pre-IPO investors in the mergers described in “Organizational Structure—Reorganization Transactions—Pre-IPO Investors Mergers,” (b) future redemptions or exchanges by us of Endeavor Operating Company Units from members of Endeavor Operating Company (other than Endeavor Manager) in exchange for shares of our Class A common stock or cash or (c) payments made under the tax receivable agreement, (ii) any net operating losses or certain other tax attributes of certain pre-IPO investors that are available to us to offset income or gain earned after the mergers, (iii) any existing tax basis associated with Endeavor Operating Company Units the benefit of which is allocable to us as a result of the exchanges of such Endeavor Operating Company Units for shares of our Class A common stock and (iv) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the covered tax attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.

The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of redemptions or exchanges by members of Endeavor Operating Company, the price of our Class A common stock at the time of the redemptions or exchange, the extent to which such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable and the portion of our payments under the tax receivable agreement constituting imputed interest.

Future payments under the tax receivable agreement could be substantial. Assuming that all units eligible to be redeemed for cash or Class A common stock would be exchanged for Class A common stock by Endeavor

 

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Group Holdings at the time of the offering and that we will have sufficient taxable income to utilize all of the tax attributes covered by the tax receivable agreement when they are first available to be utilized under applicable law, we estimate that payments to the Post-IPO TRA Holders under the tax receivable agreement would aggregate to approximately $867.7 million over the next 15 years and for yearly payments over that time to range between approximately $17.9 million to $73.9 million per year, based on an assumed public offering price of $27.00 (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus). The payments under the tax receivable agreement are not conditioned upon any Post-IPO TRA Holder’s continued ownership of us.

In addition, the Post-IPO TRA Holders (or their transferees or other assignees) will not reimburse us for any payments previously made if any covered tax benefits are subsequently disallowed, except that any excess payments made to any Post-IPO TRA Holder (or such holder’s transferees or assignees) will be netted against future payments that would otherwise be made under the tax receivable agreement with such Post-IPO TRA Holder, if any, after our determination of such excess. We could make payments to the Post-IPO TRA Holders under the tax receivable agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity.

In addition, the tax receivable agreement provides that, upon certain mergers, asset sales or other forms of business combination, or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be based on certain assumptions, including that we or our successor would have sufficient taxable income to fully utilize the tax benefits covered by the tax receivable agreement. As a result, upon a change of control, we could be required to make payments under the tax receivable agreement that are greater than the specified percentage of our actual cash tax savings, which could negatively impact our liquidity.

In addition, the tax receivable agreement will provide that in the case of a change in control of the Company or a material breach of our obligations under the tax receivable agreement, the Post-IPO TRA Holders will have the option to terminate the tax receivable agreement, and we will be required to make a payment to the Post-IPO TRA Holders covered by such termination in an amount equal to the present value of future payments (calculated using a discount rate equal to the lesser of 6.50% or LIBOR plus 200 basis points, which may differ from our, or a potential acquirer’s, then-current cost of capital) under the tax receivable agreement, which payment would be based on certain assumptions, including those relating to our future taxable income. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. These provisions of the tax receivable agreement may result in situations where the Post-IPO TRA Holders have interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the tax receivable agreement that are substantial, significantly in advance of any potential actual realization of such further tax benefits, and in excess of our, or a potential acquirer’s, actual cash savings in income tax.

Finally, because we are a holding company with no operations of our own, our ability to make payments under the tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. The Senior Credit Facilities restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the tax receivable agreement. To the extent that we are unable to make payments under the tax receivable agreement as a result of restrictions in our Senior Credit Facilities, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

Risks Related to this Offering and Our Class A Common Stock

No public market currently exists for our Class A common stock, and there can be no assurance that an active public market for our Class A common stock will develop.

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price for our Class A common stock will be determined through negotiations between us and the

 

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representatives of the underwriters and may not be indicative of the market price of our Class A common stock after this offering. If you purchase shares of our Class A common stock, you may not be able to resell those shares of Class A common stock at or above the initial public offering price. We cannot predict the extent to which investor interest in our Class A common stock will lead to the development of an active trading market on the Exchange or otherwise or how liquid that market might become. If an active public market for our Class A common stock does not develop, or is not sustained, it may be difficult for you to sell your Class A common stock at a price that is attractive to you or at all.

Future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress the price of our Class A common stock.

Additional sales of a substantial number of shares of our Class A common stock in the public market after this offering, or the perception that such sales may occur, could have an adverse effect on our stock price and could impair our ability to raise capital through the sale of additional stock. Upon the completion of this offering, we will have 124,894,357 shares of Class A common stock issued and outstanding (or 127,144,357 shares of Class A common stock if the underwriters exercise their option to purchase additional shares). In addition, 110,298,311 shares of Class A common stock may be issued upon the exercise of the redemption rights of our pre-IPO equityholders (other than outstanding Endeavor Profits Units described below) described elsewhere in this prospectus. Furthermore, redemptions or exchanges of Endeavor Manager Units and Endeavor Operating Company Units (and the corresponding shares of Class X common stock) into Class A common stock will have a dilutive effect on the number of outstanding shares of our Class A common stock, even if the indirect or direct economic ownership of Endeavor Operating Company or Endeavor Manager, as applicable, by holders of our Class A common stock remain unchanged. The Class A common stock offered hereby will be freely tradable without restriction under the Securities Act of 1933, as amended (the “Securities Act”), except for any Class A common stock that may be held or acquired by our directors, executive officers and other affiliates (as that term is defined in the Securities Act), which will be restricted securities under the Securities Act. The shares of Class A common stock not being offered hereby or issuable as described above will be restricted securities. Restricted securities may not be sold in the public market unless they are registered under the Securities Act or an exemption from registration is available.

Under the Registration Rights Agreement described under the heading “Certain Relationships and Related Party Transactions—Registration Rights Agreement,” our equityholders immediately following the completion of the reorganization transactions but prior to the completion of this offering, including Executive Holdcos and the Silver Lake Equityholders (our “Principal Stockholders”), will have demand and piggyback rights that will require us to file registration statements registering their Class A common stock (including shares of Class A common stock issuable upon the exercise by members of Endeavor Operating Company (other than Endeavor Manager) or members of Endeavor Manager (other than us) of their redemption rights described elsewhere in this prospectus) or to include sales of such Class A common stock in registration statements that we may file for ourselves or other stockholders. Any shares of Class A common stock sold under these registration statements will be freely tradable in the public market. In the event that such registration rights are exercised and a large number of Class A common stock is sold in the public market, such sales could reduce the trading price of our Class A common stock. These sales also could impede our ability to raise future capital. Additionally, we will bear all expenses in connection with any such registrations, including reimbursement of the reasonable fees and disbursements of one law firm for the selling stockholders (except that selling stockholders will be responsible for their pro rata share of underwriters’ commissions and discounts). See “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

We and each of our executive officers and directors, Executive Holdcos, the Silver Lake Equityholders and certain of our other existing equityholders have agreed with the underwriters that for a period of 180 days after the date of this prospectus, we and they will not offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any of our common stock, or any options or warrants to purchase any of our common stock or any securities convertible into, exchangeable for or that represent the right to receive our common stock (including, without limitation, Endeavor Operating Company Units and Endeavor Manager Units), subject to

 

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specified exceptions including that we may, during such 180-day period, (i) offer, contract to sell or issue Class A common stock or securities convertible into Class A common stock (including Endeavor Operating Company Units or Endeavor Manager Units) in connection with an acquisition or business combination (including the filing of a registration statement on Form S-4 or other appropriate form with respect thereto) or the entering into of a joint venture, provided that the aggregate number of shares of Class A common stock that may be issued (excluding any shares of Class A common Stock, Endeavor Manager Units or Endeavor Operating Company Units offered or contracted to be sold pursuant to a signed agreement in connection with an acquisition, business combination, joint venture or any similar transaction solely to the extent no shares of Class A common stock, Endeavor Operating Company Units or Endeavor Manager Units are issued during the 180-day period) shall not exceed 10% of the total number of shares of Class A common stock (determined after giving effect to the assumed exchange of all Endeavor Operating Company Units and Endeavor Manager Units then outstanding for newly issued shares of Class A common stock) issued and outstanding as of the closing of this offering and provided further that the acquirer of such common stock agrees in writing to be bound by the obligations and restrictions of our lock-up agreement and (ii) offer or issue Endeavor Operating Company Units to our employees or employees of any of our subsidiaries who are not employees of such entity as of the date of this prospectus. Goldman Sachs & Co. LLC, KKR Capital Markets LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC may, in their discretion, at any time without prior notice (except with respect to common stock held by our executive officers and directors as described in the lock-up agreement), release all or any portion of the common stock from the restrictions in any such agreement. See “Underwriting (Conflicts of Interest)” for more information. After the lock-up agreements expire, up to an additional 173,515,223 shares of Class A common stock (including shares of Class A common stock issuable upon the exercise by members of Endeavor Operating Company (other than Endeavor Manager) or Endeavor Manager (other than us) of their redemption rights described elsewhere in this prospectus) may be sold by these equityholders in the public market either in a registered offering or pursuant to an exemption from registration, such as Rule 144 promulgated under the Securities Act (“Rule 144”). Of these shares, 67,545,122 shares may be immediately sold under Rule 144 without being subject to the volume, manner of sale and other restrictions of such rule. See “Shares Available for Future Sale” for a more detailed description of the restrictions on selling Class A common stock after this offering.

In addition, subject to certain restrictions:

 

   

the holders of 10,398,847 Endeavor Profits Units, which have a weighted-average per unit hurdle price of $21.20 per Endeavor Profits Unit, will be able to exchange their vested Endeavor Profits Units into Endeavor Operating Company Units and paired shares of our Class X common stock and Class Y common stock, as described in “Organizational Structure;”

 

   

the holders of 5,488,662 unvested Endeavor Profits Units, which have a weighted-average per unit hurdle price of $23.22 per unvested Endeavor Profits Unit, and a weighted-average vesting price of $37.30 per unvested Endeavor Profits Unit, will be able to exchange their Endeavor Profits Units into Endeavor Operating Company Units and paired shares of our Class X common stock and Class Y common stock, as described in “Organizational Structure.” These holders may subsequently acquire shares of Class A common stock upon the exercise of their redemption rights; and

 

   

the holders of 391,986 Endeavor Operating Company Units with performance-based vesting conditions, which have a weighted-average per unit vesting price of $34.25, will be able to exchange their Endeavor Operating Company Units and paired shares of our Class X common stock, as described in “Organizational Structure.” These holders may subsequently acquire shares of our Class A common stock upon the exercise of their redemption rights.

In addition, we have initially reserved for issuance under our 2019 Incentive Award Plan 15,000,000 shares of Class A common stock. Any shares of Class A common stock that we issue, including under our 2019 Incentive Award Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase Class A common stock in this offering. Moreover, while in the past the Company has historically settled Endeavor Phantom Units in cash, it may in its discretion settle these in equity in the future, which would dilute the percentage ownership held by the investors who purchase Class A common stock in this offering.

 

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The price of our Class A common stock may be volatile, and you may be unable to resell your Class A common stock at or above the initial public offering price or at all.

After this offering, the market price for our Class A common stock is likely to be volatile, in part because our Class A common stock has not previously been traded publicly. In addition, the market price for our Class A common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:

 

   

trends and changes in consumer preferences in the industries in which we operate;

 

   

changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the consumer and advertising marketplaces;

 

   

changes in key personnel;

 

   

our entry into new markets;

 

   

changes in our operating performance;

 

   

investors’ perceptions of our prospects and the prospects of the businesses in which we participate;

 

   

fluctuations in quarterly revenue and operating results, as well as differences between our actual financial and operating results and those expected by investors;

 

   

the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

   

announcements relating to litigation;

 

   

guidance, if any, that we provide to the public, any changes in such guidance or our failure to meet such guidance;

 

   

changes in financial estimates or ratings by any securities analysts who follow our Class A common stock, our failure to meet such estimates or failure of those analysts to initiate or maintain coverage of our Class A common stock;

 

   

downgrades in our credit ratings or the credit ratings of our competitors;

 

   

the development and sustainability of an active trading market for our Class A common stock;

 

   

investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives;

 

   

the inclusion, exclusion, or deletion of our Class A stock from any trading indices;

 

   

future sales of our Class A common stock by our officers, directors and significant stockholders;

 

   

other events or factors, including those resulting from system failures and disruptions, hurricanes, wars, acts of terrorism, other natural disasters or responses to such events;

 

   

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; and

 

   

changes in accounting principles.

These and other factors may lower the market price of our Class A common stock, regardless of our actual operating performance. As a result, our Class A common stock may trade at prices significantly below the initial public offering price.

In addition, the stock markets, including the Exchange, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

 

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If you invest in our Class A common stock, you will experience dilution to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book deficit per share of our Class A common stock.

Purchasers of our Class A common stock in this offering will experience immediate and substantial dilution in net tangible book deficit per share to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book deficit per share of our Class A common stock. After giving effect to the reorganization transactions, the estimated impact of the tax receivable agreement, the Preferred Equity Redemption, this offering and the application of the net proceeds from this offering, on a fully exchanged and converted basis, our pro forma net tangible book deficit would have been approximately $(3,172) million, or $(13.49) per share, representing an immediate decrease in net tangible book deficit of $2.62 per share to existing equityholders and an immediate dilution in net tangible book deficit of $40.49 per share to new investors in this offering. For a further description of the dilution that you will experience immediately after the closing of this offering, see “Dilution.”

We do not expect to pay any cash dividends for the foreseeable future.

We currently expect to retain all of our future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends for the foreseeable future following the completion of this offering. The declaration and payment of future dividends to holders of our Class A common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, legal requirements, tax obligations, restrictions in the debt instruments of our subsidiaries, including the Senior Credit Facilities, and other factors deemed relevant by our board of directors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Historical Liquidity and Capital Resources—Debt Facilities” for more information on the restrictions the Senior Credit Facilities impose on our ability to declare and pay cash dividends. As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their respective jurisdictions of organization, agreements of our subsidiaries or covenants under future indebtedness that we or they may incur.

We will have broad discretion in the use of the net proceeds from this offering.

Our management will have broad discretion in the application of a portion of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess how a portion of the net proceeds are being used. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management may not apply the net proceeds from this offering in ways that ultimately increase the value of your investment. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

If we are unable to effectively implement or maintain a system of internal control over financial reporting, we may not be able to accurately or timely report our financial results and our stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires us to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year, include a management report assessing the effectiveness of our internal control over financial reporting, and include a report issued by our independent registered public accounting firm on that assessment, in each case beginning with our Annual Report on Form 10-K for the year ending December 31, 2020. We have identified a material weakness and may in the future identify additional material weaknesses or significant deficiencies that we may

 

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be unable to remedy before the requisite deadline for those reports. Our ability to comply with the annual internal control reporting requirements will depend on the effectiveness of our financial reporting and data systems and controls across our company. We expect these systems and controls to involve significant expenditures and to become increasingly complex as our business grows. To effectively manage this complexity, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Any weaknesses or deficiencies or any failure to implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations or result in material misstatements in our financial statements, which could adversely affect our business and reduce our stock price.

We recently identified a material weakness in our internal control over financial reporting that resulted from not having a sufficiently documented risk assessment process and sufficiently documented compliance communication and investigation policies.

We recently identified a deficiency in the design and operation of our internal control over financial reporting that constituted a material weakness. This material weakness resulted from not having a sufficiently documented risk assessment process to identify and analyze risks of misstatement due to error and/or fraud, and not having sufficiently documented compliance communication and investigation policies. This deficiency did not result in any error or restatement of our financial statements.

We have taken steps to address this deficiency and have established an initial remediation plan. This remediation plan focuses on enhancing our existing risk assessment process, as well as our compliance communication and investigation policies and processes. Post enhancement, we intend to perform sufficient testing to evidence remediation; however, this material weakness may not be fully remediated until we have operated our business with these controls in place for a sufficient period of time.

Although not required for a private company, in 2017, we established an internal audit function focused on testing internal controls over financial reporting in preparation of the requirements of the Sarbanes-Oxley Act. However, we have not been required to provide a management assessment of internal controls under section 404(a) of the Sarbanes-Oxley Act. It is possible that if we had a 404(a) assessment, additional material weaknesses may have been identified. Additionally, our registered independent public accounting firm has not been engaged to perform an audit of our internal controls over financial reporting.

If we identify future material weaknesses in our internal control over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations. Under Section 404 of the Sarbanes-Oxley Act, in the future we will be required to evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report as to internal control over financial reporting. Failure to maintain effective internal control over financial reporting also could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. We cannot assure you that our existing material weakness will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could materially adversely affect our business, operating results, and financial condition.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us or our business, the price of our Class A common stock and trading volume could decline.

The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our Class A common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our Class A common stock or publishes inaccurate or unfavorable research about us or our business, our share price would

 

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likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which could cause our stock price and trading volume to decline. In addition, if our operating results fail to meet the expectations of securities analysts, our stock price would likely decline.

Provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third party.

Our certificate of incorporation and by-laws will contain several provisions that may make it more difficult or expensive for a third party to acquire control of us without the approval of our board of directors. These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that stockholders may consider favorable, include the following, some of which may only become effective upon the Triggering Event:

 

   

the 20 vote per share feature of our Class Y common stock;

 

   

the fact that our Class Y common stock retains its 20 vote per share feature until such share of Class Y common stock is canceled/redeemed for no consideration upon, subject to certain exceptions, (i) the disposition of (a) the paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) and/or (b) the shares of Class A common stock (as a result of a redemption of paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) paired with such Class Y common stock or as a result of other transfers thereof) or (ii) a Triggering Event;

 

   

the division of our board of directors into three classes and the election of each class for three-year terms;

 

   

the sole ability of the Executive Committee, prior to the Triggering Event, to fill a vacancy on the board of directors;

 

   

prior to a Triggering Event and subject to certain exceptions, the vesting of all the power and authority of our board of directors to our Executive Committee;

 

   

advance notice requirements for stockholder proposals and director nominations;

 

   

after the Triggering Event, provisions limiting stockholders’ ability to call special meetings of stockholders, to require special meetings of stockholders to be called and to take action by written consent;

 

   

after the Triggering Event, in certain cases, the approval of holders representing at least 6623% of the total voting power of the shares entitled to vote generally in the election of directors will be required for stockholders to adopt, amend or repeal our by-laws, or amend or repeal certain provisions of our certificate of incorporation;

 

   

the required approval of holders representing at least 6623% of the total voting power of the shares entitled to vote at an election of the directors to remove directors; and

 

   

the ability of our governing body to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our governing body.

These provisions of our certificate of incorporation and by-laws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our Class A common stock in the future, which could reduce the market price of our Class A common stock. For more information, see “Description of Capital Stock.”

 

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In the event of a merger, consolidation or tender or exchange offer, holders of our Class A common stock shall not be entitled to receive excess economic consideration for their shares over that payable to the holders of the Class B common stock.

No shares of Class B common stock, the primary purpose of which is to be available for issuance in connection with acquisitions, joint ventures, investments or other commercial arrangements, will be issued and outstanding upon the closing of this offering. If we choose to issue Class B common stock in the future, the holders of our Class A common stock shall not be entitled to receive economic consideration for their shares in excess of that payable to the holders of the then outstanding shares of Class B common stock in the event of a merger, consolidation or tender or exchange offer, even though our Class B common stock does not have the right to vote. This would result in a lesser payment to the holders of Class A common stock than if there are no shares of Class B common stock outstanding at the time of such merger, consolidation or tender or exchange offer. For more information, see “Description of Capital Stock.”

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of our company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director (including any director serving as a member of the Executive Committee), officer, agent or other employee or stockholder of our company to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law, the amended and restated certificate of incorporation or our by-laws or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. However, the exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other claim for which the federal courts have exclusive jurisdiction. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Transformation into a public company may increase our costs and disrupt the regular operations of our business.

We have historically operated as a privately owned company, and we have incurred, and expect to in the future incur, significant additional legal, accounting, reporting and other expenses as a result of having publicly traded common stock, including, but not limited to, increased costs related to auditor fees, legal fees, directors’ fees, directors and officers insurance, investor relations and various other costs. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Exchange Act, the Sarbanes-Oxley Act and the Dodd–Frank Wall Street Reform and Consumer Protection Act, 2010, as well as rules implemented by the Securities and Exchange Commission (the “SEC”) and the Public Company Accounting Oversight Board. Compliance with these rules and regulations will make some activities more difficult, time-consuming, or costly, and increase demand, and as a result may place a strain, on our systems and

 

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resources. Moreover, the additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, which could have an adverse effect on our business, financial condition and results of operations.

In making your investment decision, you should understand that we have not authorized any other party to provide you with information concerning this initial public offering or us.

You should carefully evaluate all of the information in this prospectus. We have in the past received, and may continue to receive, a high degree of media coverage, including coverage that is not directly attributable to statements made by our officers or employees, that incorrectly reports on statements made by our officers or employees or that is misleading as a result of omitting information provided by us, our officers, or our employees. We have not authorized any other party to provide you with information concerning this initial public offering or us.

Risks Related to Tax Matters

Tax matters may cause significant variability in our financial results.

Our businesses are subject to income taxation in the United States, as well as in many tax jurisdictions throughout the world. Tax rates in these jurisdictions may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, but not limited to, projected levels of taxable income, pre-tax income being lower than anticipated in countries with lower statutory rates or higher than anticipated in countries with higher statutory rates, increases or decreases to valuation allowances recorded against deferred tax assets, tax audits conducted and settled by various tax authorities, adjustments to income taxes upon finalization of income tax returns, the ability to claim foreign tax credits, and changes in tax laws and their interpretations in countries in which we are subject to taxation.

We may be required to pay additional taxes as a result of the new partnership audit rules.

The Bipartisan Budget Act of 2015 changed the rules applicable to U.S. federal income tax audits of partnerships, including entities such as Endeavor Operating Company that are taxed as partnerships. Under these rules (which generally are effective for taxable years beginning after December 31, 2017), subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) is determined, and taxes, interest, and penalties attributable thereto, are assessed and collected, at the entity level. Although it is uncertain how these rules will be implemented, it is possible that they could result in Endeavor Operating Company (or any of its applicable subsidiaries that are treated as partnerships for U.S. federal income tax purposes) being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as an indirect member of Endeavor Operating Company (or such other entities), could be required to indirectly bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment.

 

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Under certain circumstances, Endeavor Operating Company may be eligible to make an election to cause holders of Endeavor Operating Company Units to take into account the amount of any understatement, including any interest and penalties, in accordance with such holders’ interest in Endeavor Operating Company in the year under audit. We will decide whether to cause Endeavor Operating Company to make this election in our sole discretion. If Endeavor Operating Company does not make this election, the then-current holders of Endeavor Operating Company Units (including Endeavor Group Holdings as an indirect member of Endeavor Operating Company) would economically bear the burden of the understatement even if such holders had a different percentage interest in Endeavor Operating Company during the year under audit, unless, and only to the extent, Endeavor Operating Company is able to recover such amounts from current or former impacted holders of Endeavor Operating Company.

The changes created by these new rules are sweeping and in many respects dependent on the promulgation of future regulations or other guidance by the U.S. Department of the Treasury.

The tax classification of Endeavor Operating Company could be challenged.

We intend that Endeavor Operating Company has been and will continue to be treated as a partnership for federal and, if applicable, state or local income tax purposes and not as an association taxable as a corporation. However, if any taxing authority were to successfully assert otherwise, the tax consequences resulting therefrom would be materially different than those described elsewhere in this prospectus.

We may be required to fund withholding tax upon certain exchanges of Endeavor Operating Company Units into shares of our common stock by non-U.S. holders

In the event of a transfer by a non-U.S. transferor of an interest in a partnership that is engaged in a U.S. trade or business, the transferee generally must withhold tax in an amount equal to ten percent of the amount realized (as determined for U.S. federal income tax purposes) by the transferor on such transfer. After the reorganization transactions, holders of Endeavor Operating Company Units are expected to include non-U.S. holders. Pursuant to the Endeavor Operating Company Agreement, those non-U.S. holders’ Endeavor Operating Company Units may be redeemed for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock (which redemption, if made for shares of Class A common stock, would be effectuated via a direct purchase by Endeavor Group Holdings). It is expected that we will have to withhold ten percent of the amount realized (as determined for U.S. federal income tax purposes) by the non-U.S. holders in respect of these transactions. We may not have sufficient cash to satisfy such withholding obligation, and, we may be required to incur additional indebtedness or sell shares of our Class A common stock in the open market to raise additional cash in order to satisfy our withholding tax obligations.

We may incur certain tax liabilities attributable to our pre-IPO investors as a result of the reorganization transactions.

In connection with the reorganization transactions, certain of our pre-IPO investors, including certain affiliates of Silver Lake Partners, will merge with and into Endeavor Group Holdings. See “Organizational Structure—Reorganization Transactions—Pre-IPO Investors Mergers.” As the successor to these merged entities, Endeavor Group Holdings will generally succeed to and be responsible for any outstanding or historical tax liabilities of the merged entities, including any liabilities that might be incurred as a result of the mergers described in the previous sentence. Any such liabilities for which Endeavor Group Holdings is responsible could have an adverse effect on our liquidity and financial condition.

Future changes to U.S. and foreign tax laws could adversely affect us.

The Group of Twenty (“the G20”), the Organization for Economic Co-operation and Development (“the OECD”), the U.S. Congress and Treasury Department and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational

 

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corporations, including, but not limited to, transfer pricing, country-by-country reporting and base erosion. As a result, the tax laws in the United States and other countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could have an adverse effect on our worldwide tax liabilities, business, financial condition and results of operations.

Our ability to use certain net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in ownership of the relevant corporation by “5% shareholders” (as defined under U.S. income tax laws) that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. If our corporate subsidiaries experience one or more ownership changes in connection with this offering and other transactions in our stock, then we may be limited in our ability to use our corporate subsidiaries’ net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that such subsidiaries earn. Any such limitations on the ability to use net operating loss carryforwards and other tax assets could adversely impact our business, financial condition and operating results.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. You should not place undue reliance on forward-looking statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project” or, in each case, their negative, or other variations or comparable terminology and expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the forward-looking statements contained in this prospectus are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

 

   

our need to anticipate and address changes in public and consumer tastes and preferences and industry trends;

 

   

the effect of factors beyond our control, such as adverse economic conditions, on our operations;

 

   

our ability to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies;

 

   

our reliance on our professional reputation and brand name;

 

   

our dependence on the relationships of our management, agents and other key personnel with clients across many content categories;

 

   

our ability to identify, sign and retain clients;

 

   

our ability to identify, recruit and retain qualified and experienced agents and managers;

 

   

our ability to represent clients and also develop and sell content, which may create a conflict of interest;

 

   

our ability to avoid or manage conflicts of interest arising from our client and business relationships;

 

   

the loss or diminished performance of members of our executive management and other key employees;

 

   

our dependence on key relationships with television and cable networks, satellite providers, digital streaming partners, corporate sponsors and other distribution partners;

 

   

our ability to effectively manage the integration of and recognize economic benefits from the businesses acquired in our recent and future transactions, our operations at our current size, and any future growth;

 

   

the conduct of our operations through joint ventures and other investments with third parties;

 

   

immigration restrictions and related factors;

 

   

failure in technology, including at live events, or security breaches of our information systems;

 

   

the unauthorized disclosure of sensitive or confidential client or customer information;

 

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our ability to protect our trademarks and other intellectual property rights, including our brand image and reputation, and the possibility that others may allege that we infringe upon their intellectual property rights;

 

   

the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to both domestic and to international markets;

 

   

fluctuations in foreign currency exchange rates;

 

   

litigation and other proceedings to the extent uninsured or underinsured;

 

   

our compliance with certain franchise and licensing requirements of unions and guilds and dependence on unionized labor;

 

   

our substantial indebtedness and our ability to maintain compliance with restrictive covenants in the documents governing such indebtedness; and

 

   

the future trading prices of our Class A common stock and the impact of securities analysts’ reports on these prices.

These and other factors are more fully discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in this prospectus. These risks could cause actual results to differ materially from those implied by forward-looking statements in this prospectus. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

All information contained in this prospectus is materially accurate and complete as of the date of this prospectus. You should keep in mind, however, that any forward-looking statement made by us in this prospectus, or elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no obligation to update any forward-looking statements in this prospectus after the date of this prospectus, except as required by federal securities laws. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters and attributable to us or any other person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to within this prospectus. In light of these risks and uncertainties, you should keep in mind that any event described in a forward-looking statement made in this prospectus or elsewhere might not occur.

 

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ORGANIZATIONAL STRUCTURE

This offering is being conducted through what is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they decide to undertake an initial public offering. The Up-C structure can provide tax benefits and associated cash flow advantages to both the issuer corporation and the existing owners of the partnership or limited liability company in the initial public offering.

Structure Prior to the Reorganization Transactions

We currently conduct our business through Endeavor Operating Company and its subsidiaries. Prior to the consummation of the reorganization transactions described below and this offering, all of Endeavor Operating Company’s outstanding equity interests, including its Class A common units, profits units and investment incentive units, are owned by the following persons:

 

   

WME Holdco, LLC, which we refer to as “WME Holdco,” and certain other management holding companies, which we refer to collectively as the “Management Holdcos.” Each of the Management Holdco’s equityholders include current and former senior officers, employees or other service providers of Endeavor Operating Company and its subsidiaries and certain other investors;

 

   

certain entities that are affiliates of Silver Lake Partners;

 

   

certain other institutional pre-IPO investors; and

 

   

certain other persons, including senior officers and advisers of Endeavor Operating Company and its subsidiaries.

 

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The following diagram depicts Endeavor Operating Company’s organizational structure prior to the reorganization transactions. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within Endeavor Operating Company’s organizational structure.

 

 

LOGO

Class A Common Units

Prior to the commencement of the reorganization transactions, the Class A common units are owned by WME Holdco, certain affiliates of Silver Lake Partners, and certain pre-IPO investors.

Endeavor Operating Company’s existing Class A common units are entitled to participate pro rata in residual distributions by Endeavor Operating Company, subject to certain preferences.

Profits Units

Prior to the commencement of the reorganization transactions, Endeavor Operating Company will have limited liability company interests outstanding in the form of profits units, which are entitled to participate pro rata in a sale or other specified capital transactions subject to certain preferences and their respective hurdle amounts or, in certain cases, distributions of operating cash flow from Endeavor Operating Company. Certain profits units are designated as “catch-up” units and are entitled to receive a preference on distributions once the distribution threshold applicable to such units has been met.

 

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The profits units were issued directly to, and are currently held by:

 

   

the Management Holdcos, on behalf of certain members of the management of Endeavor Operating Company to whom the Management Holdcos, in turn, issued corresponding management units; and

 

   

certain senior officers of Endeavor Operating Company.

Certain of the profits units (and the corresponding management units) vest over specified time periods, subject to the continued service of the applicable employee on each annual vesting date and, in certain cases, acceleration upon an initial public offering. Certain of the profits units (and the corresponding management units) are subject to performance-based vesting based on achievement of certain performance targets.

Certain of the profits units (and the corresponding management units) are subject to forfeiture and repurchase provisions upon certain termination events. If any management units of the Management Holdcos are forfeited for any reason, then the corresponding profits units of Endeavor Operating Company held by the Management Holdcos will be forfeited for no consideration as described below. Each of the Management Holdcos has the right to repurchase vested management units from management members upon a termination of employment for fair market value, subject to a discount under certain circumstances. If any of the Management Holdcos exercises its right to repurchase vested management units from a management member, then the management units held by the management member will be redeemed in exchange for the corresponding profits units, and the applicable Management Holdco will exercise its corresponding right to require Endeavor Operating Company to repurchase the corresponding profits units. If the repurchase price of the management units is less than fair market value (including any situation where the relevant management units are forfeited, as described in the first sentence of this paragraph), then the repurchase price for the corresponding profits units of Endeavor Operating Company will be reduced accordingly.

Certain of the profits units (and the corresponding management units) are subject to forfeiture and repurchase provisions upon certain termination events. If any management units of the Management Holdcos are forfeited for any reason, then the corresponding profits units of Endeavor Operating Company held by the Management Holdcos will also be forfeited for no consideration. Each of the Management Holdcos has the right to repurchase vested management units from management members upon a termination of employment for fair market value, subject to a discount under certain circumstances. If any of the Management Holdcos exercises its right to repurchase vested management units from a management member, then it will exercise its corresponding right to require Endeavor Operating Company to repurchase all or a portion of the profits units that correspond to the repurchased management units. Endeavor Operating Company will pay the repurchase price for the profits units that correspond to the repurchased management units. If the repurchase price of the management units is less than fair market value, then the repurchase price for the corresponding profits units of Endeavor Operating Company will be reduced accordingly.

Investment Incentive Units

Prior to the commencement of the reorganization transactions, Endeavor Operating Company also will have 100 limited liability company interests outstanding in the form of investment incentive units, all held by WME Holdco, which represent the right to receive, upon dispositions of certain specified investments, a non-pro rata priority distribution equal to 5% of the gain, if any, realized by Endeavor Operating Company on such specified investments.

 

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Reorganization Transactions

Prior to the closing of this offering, we intend to complete an internal reorganization through a series of transactions, which we refer to as the “reorganization transactions.” In connection with the reorganization transactions:

General

 

   

we will amend and restate our certificate of incorporation and will be authorized to issue four classes of common stock, which we refer to collectively as our “common stock” and which are summarized in the following table:

 

Class of Common Stock

   Votes      Economic Rights  

Class A common stock

     1        Yes  

Class B common stock

     None        Yes  

Class X common stock

     1        None  

Class Y common stock

     20        None  

Voting shares of our common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders. We will issue shares of our Class A common stock to the investors in this offering. No shares of our Class B common stock will be outstanding upon the closing of this offering. We do not intend to list our Class B common stock, Class X common stock or Class Y common stock on any stock exchange;

 

   

Endeavor Manager, a newly formed subsidiary of Endeavor Group Holdings, will become the sole managing member of Endeavor Operating Company, and Endeavor Group Holdings will become the sole managing member of Endeavor Manager;

 

   

Endeavor Manager will issue to the equityholders of certain management holding companies common interest units in Endeavor Manager, which we refer to as “Endeavor Manager Units,” along with paired shares of our Class X common stock, as consideration for the acquisition of Endeavor Operating Company Units held by such management holding companies;

 

   

we will (i) issue to affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake Partners, shares of our Class Y common stock, Class A common stock and rights to receive payments under the tax receivable agreement described below and (ii) issue to affiliates of certain other of our pre-IPO investors shares of our Class A common stock, in each case as consideration for the acquisition of Endeavor Operating Company Units held by such pre-IPO investors;

 

   

all of the existing equity interests in Endeavor Operating Company (other than certain profits units, which will remain outstanding after this offering) will be reclassified into Endeavor Operating Company’s non-voting common interest units, which we refer to as “Endeavor Operating Company Units;”

 

   

we will issue to the holders of Endeavor Operating Company Units (other than Endeavor Manager) paired shares of our Class X common stock and, in certain instances, Class Y common stock, in each case equal to the number of Endeavor Operating Company Units held by each of them upon completion of this offering and in exchange for the payment by such holders of the aggregate par value of the Class X common stock and Class Y common stock that is received; and

 

   

Endeavor Profits Units that will remain outstanding following this offering will be economically similar to stock options. Each Endeavor Profits Unit has a per unit hurdle price, which is economically similar to the exercise price of a stock option.

Pre-IPO Investors Mergers

 

   

certain of our pre-IPO investors, including certain affiliates of Silver Lake Partners, will each merge with and into Endeavor Group Holdings in a series of mergers, whereby we will acquire the existing

 

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equity interests in Endeavor Operating Company held by them. As consideration for the mergers, we will issue to certain affiliates of such pre-IPO investors, including certain affiliates of Silver Lake Partners, shares of our Class Y common stock and/or Class A common stock and rights to receive payments under the tax receivable agreement described below. The number of shares of Class Y common stock and Class A common stock to be issued in the mergers will be based on the value of the existing equity interests in Endeavor Operating Company that we acquire in the mergers, which will be determined based on a hypothetical liquidation of Endeavor Operating Company using the initial public offering price per share of our Class A common stock in this offering;

 

   

certain other of our pre-IPO investors who are affiliates of other pre-IPO investors will merge with and into Endeavor Group Holdings in a series of mergers, whereby we will acquire the existing equity interests in Endeavor Operating Company held by them. As consideration for the mergers, we will issue to certain affiliates of such pre-IPO investors shares of our Class A common stock. The number of shares of Class A common stock to be issued in the mergers will be based on the value of the existing equity interests in Endeavor Operating Company that we acquire in the mergers, which will be determined based on a hypothetical liquidation of Endeavor Operating Company using the initial public offering price per share of our Class A common stock in this offering;

 

   

we will contribute the existing equity interests in Endeavor Operating Company that we acquire in the mergers to Endeavor Manager in exchange for an equal number of Endeavor Manager Units;

Management Holdcos Restructuring

 

   

certain of the Management Holdcos will distribute a portion of their Endeavor Operating Company Units to certain senior executives of Endeavor Operating Company in liquidation of such senior executives’ interests in such Management Holdcos;

 

   

such senior executives will contribute all or a portion of their Endeavor Operating Company Units to Executive Holdcos in exchange for interests in Executive Holdcos. Executive Holdcos will be managed by an executive committee composed of Messrs. Emanuel and Whitesell, and its equityholders will consist only of such senior executives;

 

   

certain of the Management Holdcos will then merge with and into Endeavor Manager, whereby Endeavor Manager will acquire Endeavor Operating Company Units held by such Management Holdcos. As consideration for the mergers, Endeavor Manager will issue Endeavor Manager Units to the members of the Management Holdcos, along with paired shares of our Class X common stock;

 

   

the equity interests in Executive Holdcos and Endeavor Manager held by the senior executives and other employees of Endeavor Operating Company and its subsidiaries will be subject to the same vesting provisions as the equity interests in the Management Holdcos previously held by them;

Issuances of Class X and Class Y Common Stock

 

   

the holders of Endeavor Operating Company Units (other than Endeavor Manager) will subscribe for and purchase paired shares of our Class X common stock at a purchase price of $0.00001 per share, and, in certain instances, Class Y common stock at a purchase price of $0.00001 per share, in each case in an amount equal to the number of Endeavor Operating Company Units held by each such person;

Redemption Rights

 

   

the members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units (and paired shares of Class X common stock), in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings;

 

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the members of Endeavor Manager (other than Endeavor Group Holdings) will have the right from time to time, subject to certain restrictions, to cause Endeavor Manager to redeem any or all their vested Endeavor Manager Units (and paired shares of Class X common stock), in exchange for, at our election, either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Manager;

 

   

shares of our Class Y common stock will automatically be cancelled/redeemed for no consideration, upon, subject to certain exceptions, (i) the disposition of (a) the paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) and/or (b) the shares of Class A common stock (as a result of a redemption of paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) or as a result of other transfers thereof paired with such Class Y common stock, or (ii) with respect to all shares of Class Y common stock, a Triggering Event;

 

   

from time to time, subject to certain restrictions, members of Executive Holdcos desiring to transfer a portion of their vested interests in Executive Holdcos (i) can elect to cause Executive Holdcos to distribute to them a portion of Endeavor Operating Company Units and corresponding shares of Class X common stock and Class Y common stock indirectly owned by such members in redemption of its corresponding interests in Executive Holdcos and (ii) immediately thereafter shall be required to exercise their redemption and exchange rights as members of Endeavor Operating Company as described above;

 

   

from time to time, subject to certain restrictions, the senior officers that directly or indirectly hold Endeavor Profits Units will have the right to, if applicable, (i) cause the applicable Management Holdco to distribute to them any vested Endeavor Profits Units indirectly owned by them in redemption for their corresponding interests in such Management Holdco, (ii) immediately thereafter shall be required to cause Endeavor Operating Company to convert their vested Endeavor Profits Units into (1) a number of Endeavor Operating Company Units that will generally be equal to (a) the product of (X) the number of vested Endeavor Profits Units to be exchanged with a given per unit hurdle price and (Y) then-current spread between the per unit value of an Endeavor Operating Company Unit at the time of the exchange and the per unit hurdle price of such Endeavor Profits Units divided by (b) the per unit value of an Endeavor Operating Company Unit at the time of the exchange and (2) a corresponding number of paired shares of our Class X common stock and Class Y common stock, and (iii) immediately thereafter shall be required to exercise their redemption and exchange rights as members of Endeavor Operating Company as described above; and

 

   

all holders of Endeavor Operating Company Units, Endeavor Manager Units and Endeavor Profits Units will be prohibited from exercising the redemption and exchange rights described above until at least the later of 180 days after the closing of this offering and the end of the 2019 calendar year.

This Offering and Our Post-IPO Structure

Based on an assumed initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), we estimate that the net proceeds from this offering will be $361.6 million (or $419.3 million if the underwriters exercise their option to purchase additional shares in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to contribute the net proceeds from this offering to Endeavor Manager in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering. Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units, and such contribution amount will be used by Endeavor Operating Company for the repayment of term loan debt under our 2014 Credit Facilities, working capital and general corporate purposes. We may also use a portion of the net proceeds from this offering for acquisitions of complementary businesses or other assets. We estimate that the offering expenses (other than the underwriting

 

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discounts) will be approximately $21.2 million. All of such offering expenses will be paid for or otherwise borne by Endeavor Operating Company. See “Use of Proceeds” for further details.

We are a holding company, and immediately after the consummation of the reorganization transactions and this offering our principal asset will be our indirect ownership interests in Endeavor Operating Company. The total number of Endeavor Operating Company Units indirectly owned by us and other members of Endeavor Manager and directly owned by the members of Endeavor Operating Company at any given time will equal the sum of the outstanding shares of our Class A common stock and Class X common stock. Shares of our Class X common stock cannot be transferred except in connection with a transfer or exchange of Endeavor Operating Company Units or Endeavor Manager Units into shares of our Class A common stock, subject to certain exceptions, such as to permitted transferees. Shares of our Class Y common stock cannot be transferred, subject to certain exceptions, such as to permitted transferees.

Because we will have a controlling financial interest in Endeavor Manager, as its sole managing member, and Endeavor Operating Company, as its indirect sole managing member, we will consolidate the financial results of Endeavor Manager and Endeavor Operating Company. A portion of our net income (loss) will be allocated to the non-controlling interest to reflect (i) the entitlement of the members of Endeavor Operating Company (other than Endeavor Manager) to a portion of Endeavor Operating Company’s net income (loss) attributable to Endeavor Operating Company and (ii) the members of Endeavor Manager (other than Endeavor Group Holdings) to a portion of Endeavor Manager’s net income (loss). We will account for the reorganization transactions in a manner consistent with a common-control transaction and will initially measure the interests of the pre-IPO members of Endeavor Operating Company and the non-controlling members of Endeavor Manager in the assets and liabilities of Endeavor Operating Company at their carrying amounts as of the date of the completion of the reorganization transactions.

 

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The following diagram depicts our organizational structure following the reorganization transactions, this offering and the application of the net proceeds from this offering (assuming an initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and no exercise of the underwriters’ option to purchase additional shares). For purposes of depicting ownership of voting power in Endeavor Group Holdings, the below diagram takes into account shares of Class X common stock and Class Y common stock held by investors in this offering and our pre-IPO equityholders (including holders of all Endeavor Manager Units and Endeavor Operating Company Units). For purposes of depicting ownership of economic interests in Endeavor Group Holdings, the below diagram does not take into account (a) any performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such initial offering price, and (b) any Endeavor Profits Units. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our organization:

 

LOGO

 

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Ownership of Economic Interests

 

   

Upon completion of the reorganization transactions and this offering, and assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and an offering size of $405.0 million, the economic interests in Endeavor Group Holdings owned by investors in this offering and our pre-IPO equityholders will be as follows (excluding any equity grants issued in connection with this offering):

 

     Endeavor Group
Holdings
    Fully Converted     Fully Converted
Diluted
 
     Shares      %     Shares      %     Shares      %  
     (1)            (2)            (3)         

Shareholders of Endeavor Group Holdings

               

Investors in this offering

     15,000,000        12.0     15,000,000        6.4     15,000,000        6.3

Silver Lake Partners and related parties

     52,396,532        42.0     52,396,532        22.3     52,396,532        22.1

Affiliates of our other pre-IPO investors

     57,497,825        46.0     57,497,825        24.4     57,497,825        24.2

Sub-Total

     124,894,357        100.0     124,894,357        53.1     124,894,357        52.6

Members of Endeavor Manager (other than Endeavor Group Holdings)

                  11,138,461        4.7     11,138,461        4.7

Sub-Total

                  11,138,461        4.7     11,138,461        4.7

Members of Endeavor Operating Company (other than Endeavor Manager)

               

Silver Lake Partners and related parties

                  53,573,579        22.8     53,573,579        22.6

Affiliates of our other pre-IPO investors

                  8,198,253        3.5     8,198,253        3.5

Messrs. Emanuel and Whitesell and Executive Holdcos

                  37,388,018        15.9     39,623,393        16.7

Sub-Total

                  99,159,850        42.2     101,395,225        42.7
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     124,894,357        100.0     235,192,668        100.0     237,428,043        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Reflects the number of shares of our Class A common stock then outstanding. If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares owned by investors in this offering, and in the table above, would be 17,250,000.

(2)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at such initial offering price.

(3)

Reflects the number of shares of our Class A common stock (excluding approximately 1,880,946 restricted stock units and 1,617,774 options based on the highpoint of the estimated public offering price range set forth on the cover page of this prospectus that we intend to grant to certain directors, employees and other service providers in connection with this offering) that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, assuming (a) that all performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such initial offering price were not exchanged for any shares of our Class A common stock and (b) that all Endeavor Profits Units were exchanged into Endeavor Operating Company Units in respect of their in-the-money value at such initial offering price.

 

   

The economic rights in Endeavor Group Holdings owned by Messrs. Emanuel and Whitesell and Executive Holdcos as members of Endeavor Operating Company as reflected in the table above will vary depending on, among other things, the satisfaction of certain performance-based vesting conditions and the extent to

 

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which the Endeavor Profits Units are in the money. The following table summarizes the Endeavor Operating Company Units and Endeavor Profits Units owned by Messrs. Emanuel and Whitesell and Executive Holdcos and their applicable performance-based vesting conditions and hurdle prices:

 

     Weighted Average      Endeavor Operating Company  
     Per Unit      Basic      Fully Converted
Diluted
     Fully Converted
Fully Diluted
 
     Vesting Price      Hurdle Price      Units      Units      Units  
     (1)      (2)      (3)      (4)      (5)  

Endeavor Operating Company Units

     —          —          37,388,018        37,388,018        37,388,018  

Endeavor Operating Company Unit with performance-based vesting conditions

   $ 34.25        —          —          —          391,986  

Endeavor Profits Units

     —        $ 21.20        —          2,235,375        10,398,847  

Endeavor Profits Units with performance-based vesting conditions

   $ 37.30      $ 23.22        —          —          5,488,662  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

           37,388,018        39,623,393        53,667,513  
        

 

 

    

 

 

    

 

 

 

 

(1)

Reflects performance-based vesting conditions based on the achievement of certain equity valuation targets, expressed as a per unit price on a weighted-average basis. For Endeavor Operating Company Units and Endeavor Profits Units with these performance-based vesting conditions, subject to certain exceptions and restrictions, these conditions must be satisfied before these units become exchangeable into cash or shares of our Class A common stock (or, in the case of Endeavor Profits Units, into Endeavor Operating Company Units that would then be exchangeable into cash or shares of our Class A common stock). At the time of this offering, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), none of the performance-based vesting conditions of the 391,986 Endeavor Operating Company Units and 5,488,662 Endeavor Profits Units shown in the table above will have been satisfied (because such initial offering price would be less than the applicable per unit vesting price).

(2)

Reflects distribution thresholds, expressed as a per unit hurdle price on a weighted-average basis (similar to an exercise price for stock options). Subject to certain restrictions, Endeavor Profits Units will be exchangeable by their holders into a number of Endeavor Operating Company Units that will generally be equal to (a) the spread between the per unit value of an Endeavor Operating Company Unit at the time of the exchange and the applicable per unit hurdle price, divided by (b) the per unit value of an Endeavor Operating Company Unit. At the time of this offering, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), (i) the 10,398,847 Endeavor Profits Units shown in the table above would be exchangeable into 2,235,375 Endeavor Operating Company Units and (ii) as described in note (1) above, the 5,488,662 Endeavor Profits Units with performance-vesting conditions shown in the table above would not be exchangeable into any Endeavor Operating Company Units (because the initial offering price would be less than the applicable per unit vesting price).

(3)

Reflects the number of Endeavor Operating Company Units then outstanding, excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at the time of this offering, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus).

(4)

Reflects the number of Endeavor Operating Company Units that would be outstanding if all Endeavor Profits Units were exchanged into Endeavor Operating Company Units in respect of their in-the-money value, assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), and excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at such initial offering price.

 

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(5)

Reflects the number of Endeavor Operating Company Units that would be outstanding if (a) the performance-based vesting conditions of Endeavor Company Units and Endeavor Profits Units with such conditions were satisfied and (b) all Endeavor Profits Units were exchanged into Endeavor Operating Company Units on a one-to-one basis (regardless of their in-the-money value).

 

   

For illustrative purposes only, the following table shows how the number of economic interests in Endeavor Group Holdings would vary at various future trading prices per share of our Class A common stock after the completion of this initial public offering, assuming an offering size of $405.0 million and the reorganization transactions are completed on the basis of an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus):

 

Hypothetical

Price Per Share

of Class A Common Stock

   Endeavor Group
Holdings

Basic
     Fully Converted
Basic
     Fully Converted
Diluted
 
   Shares      Shares      Shares  
     (1)      (2)      (3)  

$20.00

     124,894,357        235,192,668        235,736,161  

$24.00

     124,894,357        235,192,668        236,407,860  

$28.00

     124,894,357        235,192,668        237,719,847  

$32.00

     124,894,357        235,192,668        239,127,294  

$36.00

     124,894,357        235,192,668        240,439,748  

$40.00

     124,894,357        235,192,668        242,775,351  

 

(1)

Reflects the number of shares of our Class A common stock then outstanding.

(2)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A Common stock, excluding Endeavor Operating Company Units with performance-based vesting conditions whose vesting conditions would not be satisfied at such initial offering price.

(3)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, assuming (a) the applicable hypothetical price per share of Class A common stock, (b) that all performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such hypothetical price per share were not exchanged for any shares of our Class A common stock, and (c) that all Endeavor Profits Units then outstanding were exchanged into Endeavor Operating Company Units in respect of their in-the-money value at such hypothetical price per share.

Ownership of Voting Rights.

 

   

Upon completion of the reorganization transactions and this offering, and assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), the combined voting power in Endeavor Group Holdings will be as follows:

 

         If the underwriters do not exercise    
    their option  to purchase additional    
    shares of Class A common stock    
        If the underwriters exercise in full    
    their option  to purchase additional    
    shares of Class A common stock    
 
     Votes     Votes  
             Total                      %                     Total                      %          

Investors in this offering

     15,000,000        0.4     17,250,000        0.5

Silver Lake Partners and related parties

     2,225,372,331        58.9     2,225,372,331        58.8

Affiliates of our other pre-IPO investors

     401,209,929        10.6     401,209,929        10.6

Members of Endeavor Manager (other than Endeavor Group Holdings)

     11,138,461        0.3     11,138,461        0.3

Messrs. Emanuel and Whitesell, Executive Holdcos

     1,127,017,773        29.8     1,127,017,773        29.8
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     3,779,738,494        100.0     3,781,988,494        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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Upon completion of the reorganization transactions and this offering, and assuming an initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and an offering size of $405.0 million, the voting rights in Endeavor Group Holdings will be owned as follows:

 

     Shares      Votes  
     Class A      Class X      Class Y      Total      %  
     (1)      (2)      (3)                

Shareholders of Endeavor Group Holdings

                                                                                  

Investors in this offering

     15,000,000        —          —          15,000,000        0.4

Silver Lake Partners and related parties

     52,396,532        —          52,396,532        1,100,327,172        29.1

Affiliates of our other pre-IPO investors

     57,497,825        —          8,864,935        234,796,525        6.2

Sub-Total

     124,894,357        —          61,261,467        1,350,123,697        35.7

Members of Endeavor Manager (other than Endeavor Group Holdings)

     —          11,138,461        —          11,138,461        0.3

Sub-Total

     —          11,138,461        —          11,138,461        0.3

Members of Endeavor Operating Company (other than Endeavor Manager)

              

Silver Lake Partners and related parties

     —          53,573,579        53,573,579        1,125,045,159        29.8

Affiliates of our other pre-IPO investors

     —          8,198,253        7,910,758        166,413,404        4.4

Messrs. Emanuel and Whitesell and Executive Holdcos

     —          53,667,513        53,667,513        1,127,017,773        29.8

Sub-Total

     —          115,439,345        115,151,850        2,418,476,336        64.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     124,894,357        126,577,806        176,413,317        3,779,738,494        100.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares of Class A common stock owned by investors in this offering, and in the table above, would be 17,250,000.

(2)

Members of Endeavor Manager (other than Endeavor Group Holdings) will receive one share of our Class X common stock for each Endeavor Management Unit owned by them. Members of Endeavor Operating Company (other than Endeavor Manager) will receive one share of our Class X common stock for each Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

(3)

Silver Lake Partners and related parties, affiliates of certain of our other pre-IPO investors, Messrs. Emanuel and Whitesell and Executive Holdcos will receive one share of our Class Y common stock for each share of Class A common stock, Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

At such time that Endeavor Profits Units are exchanged into a number of Endeavor Operating Company Units, the holders exchanging such Endeavor Profits Units will receive a number of shares of our Class X common stock and shares of our Class Y common stock for each Endeavor Operating Company Unit into which such Endeavor Profits Units were so exchanged.

Securities Outstanding at Assumed Offering Price

Unless otherwise indicated, this prospectus assumes the shares of Class A common stock are offered at $27.00 per share (the highpoint of the price range listed on the cover page of this prospectus). Although the total number of Endeavor Operating Company Units and Endeavor Manager Units outstanding after the offering will not fluctuate based on the trading price of our Class A common stock, certain share information and information regarding Endeavor Operating Company Units and Endeavor Manager Units presented in this prospectus will vary depending on the initial public offering price in this offering. Specifically, the number of Endeavor Operating Company Units and Endeavor Manager Units issued in the reorganization transactions will vary, depending on the initial public offering price in this offering, which will also impact the shares of Class X

 

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common stock and Class Y common stock, received by members of Endeavor Manager (other than Endeavor Group Holdings) and members of Endeavor Operating Company (other than Endeavor Manager). An increase in the assumed initial public offering price would result in a decrease in the amount of Endeavor Operating Company Units and Endeavor Manager Units, and in turn, shares of Class X common stock, received by holders of Endeavor Manager Units (other than Endeavor Group Holdings) and shares of Class X common stock and Class Y common stock, as applicable, received by members of Endeavor Operating Company (other than Endeavor Manager). A decrease in the assumed initial public offering price would result in an increase in the amount of Endeavor Operating Company Units and Endeavor Manager Units, and in turn, shares of Class X common stock, received by holders of Endeavor Manager Units (other than Endeavor Group Holdings) and shares of Class X common stock and Class Y common stock, as applicable, received by members of Endeavor Operating Company (other than Endeavor Manager).

For illustrative purposes only, the table below shows the number of Endeavor Manager Units held by members of Endeavor Manager (other than Endeavor Group Holdings), Endeavor Operating Company Units held by members of Endeavor Operating Company (other than Endeavor Manager) and shares of Class X common stock and Class Y common stock outstanding immediately after giving effect to the reorganization transactions and this offering (assuming no exercise of the underwriters’ option to purchase additional shares of Class A common stock from us) at various initial public offering prices:

 

     Class A
Common Stock
     Endeavor Manager
Units held by
members of
Endeavor Manager
(other than
Endeavor Group
Holdings)
     Endeavor Operating
Company Units
held by members of
Endeavor Operating
Company (other
than Endeavor
Manager)
     Class X
Common Stock
     Class Y
Common Stock
 

$26.00

     124,894,357        11,071,067        98,005,037        126,355,599        176,258,504  

$27.00

     124,894,357        11,138,461        99,159,850        126,577,806        176,413,317  

The table above excludes the following interests: (i) Endeavor Operating Company Units with performance-based vesting conditions that will remain outstanding with a weighted-average per unit vesting price; (ii) Endeavor Profits Units that will remain outstanding with a weighted-average per unit hurdle price; and (iii) Endeavor Profits Units with performance-based vesting conditions that will remain outstanding with a weighted-average per unit vesting price and a weighted-average per unit hurdle price. For illustrative purposes, the table below shows the number of such interests outstanding immediately after giving effect to the reorganization transactions and this offering (assuming no exercise of the underwriters’ option to purchase additional shares of Class A common stock from us) at various initial public offering prices:

 

     Endeavor
Operating
Company
Units (with
performance-
based vesting
conditions)
     Endeavor
Profits Units
(with a
weighted-
average per
unit hurdle
price)
     Endeavor
Profits Units
(with
performance-
based vesting
conditions
and a
weighted-
average per
unit hurdle
price)
 

$26.00

     391,986        10,398,847        5,488,662  

$27.00

     391,986        10,398,847        5,488,662  

See “Certain Relationships and Related Party Transactions” and “Description of Capital Stock” for more information on the rights associated with our capital stock and Endeavor Operating Company Units.

 

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Tax Receivable Agreement

In connection with the reorganization transactions, we will acquire existing equity interests in Endeavor Operating Company from certain of our pre-IPO investors in the mergers described above in exchange for the issuance of shares of our Class A common stock, Class Y common stock and rights to receive payments under a tax receivable agreement. As a result of these acquisitions, we will succeed to certain tax attributes of certain of our pre-IPO investors and will receive the benefit of tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries. In addition, future redemptions or exchanges of Endeavor Operating Company Units from members of Endeavor Operating Company (other than Endeavor Manager) in exchange for shares of our Class A common stock or cash are expected to produce favorable tax attributes that would not be available to us in the absence of such redemptions or exchanges.

We intend to enter into a tax receivable agreement with the Post-IPO TRA Holders, that will provide for the payment by us to the Post-IPO TRA Holders (or their transferees of Endeavor Operating Company Units or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we realize or are deemed to realize (determined by using assumptions regarding combined state and local income tax rates) as a result of (i) any tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries resulting from (a) the acquisition of equity interests in Endeavor Operating Company from certain of our pre-IPO investors in the mergers described above, (b) future redemptions or exchanges by us of Endeavor Operating Company Units from certain members of Endeavor Operating Company in exchange for shares of our Class A common stock, or cash or (c) payments under the tax receivable agreement, (ii) any net operating losses or certain other tax attributes of certain pre-IPO investors that are available to us to offset income or gain earned after the mergers, (iii) any existing tax basis associated with Endeavor Operating Company Units the benefit of which is allocable to us as a result of the exchanges of such Endeavor Operating Company Units, and (iv) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the covered tax attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made. The Post-IPO TRA Holders (or their transferees or assignees) will not reimburse us for any payments previously made if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any Post-IPO TRA Holder (or such holder’s transferees or assignees) will be netted against future payments that would otherwise be made under the tax receivable agreement with such Post-IPO TRA Holder, if any, after our determination of such excess. We could make future payments to the Post-IPO TRA Holders (or their transferees or assignees) under the tax receivable agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity. Assuming that all units eligible to be redeemed for cash or Class A common stock would be exchanged for Class A common stock by Endeavor Group Holdings at the time of the offering and that we will have sufficient taxable income to utilize all of the tax attributes covered by the tax receivable agreement when they are first available to be utilized under applicable law, we estimate that payments to the Post-IPO TRA Holders under the tax receivable agreement would aggregate to approximately $867.7 million over the next 15 years and for yearly payments over that time to range between approximately $17.9 million to $73.9 million per year, based on an assumed public offering price of $27.00 (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus). See “Risk Factors—Risks Related to Our Organization and Structure—We will be required to pay certain of our pre-IPO investors for certain tax benefits we may claim in the future, and the amounts we may pay could be significant” and “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

 

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $361.6 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us based on an assumed initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) and assuming the underwriters’ option to purchase additional shares is not exercised. If the underwriters exercise their option to purchase additional shares in full, we expect to receive approximately $419.3 million of net proceeds based on an assumed initial offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus). Based on an assumed initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus), we intend to contribute $382.8 million of the net proceeds from this offering to Endeavor Manager (or $440.5 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering (provided that we may reduce such contribution amount, without reducing the number of Endeavor Manager Units we receive, by the amount of any expenses we pay in connection with this offering (which we estimate will be approximately $21.2 million) that are not otherwise paid or for which we are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units.

We intend to cause Endeavor Operating Company to use the approximately $361.6 million of net proceeds we receive from this offering to repay $325 million of the outstanding term loan borrowings under our 2014 Credit Facilities, which term loans bear interest at a rate of LIBOR + 2.75% and mature in 2025. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Historical Liquidity and Capital Resources—Debt Facilities” for more information about our 2014 Credit Facilities. We intend to cause Endeavor Operating Company to use the approximately $36.6 million of remaining net proceeds we receive from this offering for working capital and general corporate purposes. We may also use a portion of the net proceeds from this offering for acquisitions of complementary businesses or other assets.

Because certain affiliates of Credit Suisse Securities (USA) LLC, an underwriter in this offering, are expected to receive at least five percent of the net proceeds of this offering as a result of the repayment of outstanding term loan borrowings under our 2014 Credit Facilities, Credit Suisse Securities (USA) LLC is deemed to have a “conflict of interest” under FINRA Rule 5121. As a result, this offering will be conducted in accordance with FINRA Rule 5121. See “Prospectus Summary” and “Underwriting (Conflicts of Interest).”

A $1.00 increase (decrease) in the assumed initial public offering price of $27.00 per share would increase (decrease) the amount of proceeds to us from this offering available for working capital and general corporate purposes by $14.3 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to cause Endeavor Operating Company to use any additional proceeds we receive from this offering for working capital and general corporate purposes.

 

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DIVIDEND POLICY

We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth of our business. If we decide to pay cash dividends in the future, the declaration and payment of such dividends will be at the sole discretion of the Executive Committee, prior to the Triggering Event, and thereafter our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, restrictions in our debt agreements, including the Senior Credit Facilities, our actual and anticipated future earnings, cash flow, debt service and capital requirements, the amount of distributions to us from Endeavor Operating Company and other factors that our board of directors may deem relevant. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Debt Facilities” for more information on the restrictions the Senior Credit Facilities impose on our ability to declare and pay cash dividends. Because we are a holding company, our cash flow and ability to pay dividends depends upon the financial results and cash flows of our operating subsidiaries and the distribution or other payment of cash to us in the form of dividends or otherwise from Endeavor Operating Company. See “Risk Factors—Risks Related to this Offering and Our Class A Common Stock—We do not expect to pay any cash dividends for the foreseeable future.”

Following the consummation of this offering, we expect that Endeavor Operating Company will make distributions to each of its members, including Endeavor Manager and holders of Endeavor Profits Units, in respect of the U.S. federal, state and local income tax liability attributable to each member’s allocable share of taxable income of Endeavor Operating Company, calculated using an assumed tax rate equal to the highest marginal combined income tax rate applicable to an individual or corporation resident in Los Angeles, California or New York, New York (whichever rate is higher), taking into account the deductibility of applicable state and local income taxes for U.S. federal income tax purposes (which are subject to substantial limitations for tax years 2018 through 2025). Tax distributions will be made quarterly, on an estimated basis. In situations where Endeavor Operating Company does not have sufficient cash to make tax distributions to all of its members in the full amount provided for in the Endeavor Operating Company Agreement, tax distributions made to Endeavor Manager will be reduced (relative to those tax distributions made to other members of Endeavor Operating Company) to reflect the income tax rates to which Endeavor Manager and Endeavor Group Holdings are subject and certain other factors (with the amount of such reduction being paid to the other members of Endeavor Operating Company as tax distributions). Tax distributions made to a member of Endeavor Operating Company will generally be treated as an advance of and shall be credited against future distributions to such member and no adjustments will be made to the exchange ratio for members of Endeavor Operating Company or Endeavor Manager who exercise the redemption rights described above to account for prior tax distributions. We expect that Endeavor Manager will further distribute the proceeds of any such tax distributions to us on a non-pro rata basis.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2019 (i) on an actual basis, (ii) on a pro forma basis to reflect the reorganization transactions described under “Organizational Structure,” the estimated impact of the tax receivable agreement and the Preferred Equity Redemption and (iii) on a pro forma as adjusted basis to reflect:

 

   

the sale of 15,000,000 shares of our Class A common stock in this offering at an assumed public offering price of $27.00 per share (the highpoint of the estimated offering price range set forth on the cover page of this prospectus), after deducting the underwriters’ discounts and commissions; and

 

   

the application of the net proceeds of this offering as described under “Use of Proceeds.”

This table should be read in conjunction with “Use of Proceeds,” “Unaudited Pro Forma Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes of us and Endeavor Operating Company appearing elsewhere in this prospectus.

 

     As of June 30, 2019  

(in thousands)

   Actual      Pro Forma      Pro Forma
As
Adjusted(1)
 

Cash and cash equivalents

   $ 830,936      $ 676,468      $ 721,062  
  

 

 

    

 

 

    

 

 

 

Total indebtedness(2)

   $ 4,599,271      $ 5,059,271      $ 4,739,043  

Redeemable non-controlling interests

     151,301        151,301        151,301  

Redeemable equity

     43,693        43,693        —    

Equity:

        

Class A common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, 124,894,357 shares issued and outstanding, pro forma

     —          1        1  

Class B common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, no shares issued and outstanding, pro forma

     —          —          —    

Class X common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, 126,577,806 shares issued and outstanding, pro forma

     —          1        1  

Class Y common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 1,000,000,000 shares authorized, 176,413,317 shares issued and outstanding, pro forma

     —          2        2  

Preferred stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 1,000,000,000 shares authorized, no shares issued and outstanding, pro forma

     —          —          —    

Additional paid-in capital

     —          559,866        1,397,129  

Accumulated deficit

     —          —          (238,595

Members’ capital

     1,473,972        —          —    

Accumulated comprehensive loss

     (127,115      (63,441      (67,502
  

 

 

    

 

 

    

 

 

 

Total members’ equity/shareholders’ equity

     1,346,857        496,430        1,091,036  

Nonredeemable non-controlling interests(3)

     1,226,280        1,334,394        1,158,672  
  

 

 

    

 

 

    

 

 

 

Total equity

     2,573,137        1,830,824        2,249,708  
  

 

 

    

 

 

    

 

 

 

Total capitalization

   $ 7,367,402      $ 7,085,089      $ 7,140,052  
  

 

 

    

 

 

    

 

 

 

 

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(1)

A $1.00 increase (decrease) in the assumed initial public offering price of $27.00 per share, would increase (decrease) each of additional paid-in capital, total equity and total capitalization by $15.0 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(2)

Represents borrowings under the Senior Credit Facilities, consisting of (i) our $2,635 million first lien term loan under the 2014 Credit Facilities, and (ii) $1,869 million first lien term loan under the UFC Credit Facilities. Under the Senior Credit Facilities’ revolving credit facilities, we also have up to $329 million of borrowing availability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding the Senior Credit Facilities.

(3)

On an actual basis, includes the UFC Preferred Units, which have a carrying value of $499.3 million as of June 30, 2019. On a pro forma and pro forma as adjusted basis, gives effect to the Preferred Equity Redemption.

 

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DILUTION

If you invest in our Class A common stock, you will experience dilution to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book deficit per share of our Class A common stock. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the book value per share attributable to the Class A common stock held by existing equityholders (including all shares issuable upon exchange or conversion).

Our pro forma net tangible book deficit as of June 30, 2019 would have been approximately $(3,547) million, or $(16.11) per share of our common stock. Pro forma net tangible book deficit represents the amount of total tangible assets less total liabilities, and pro forma net tangible book deficit per share represents pro forma net tangible book deficit divided by the number of shares of common stock outstanding, in each case after giving effect to the reorganization transactions (based on an assumed initial public offering price of $27.00 per share (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus)), the estimated impact of the tax receivable agreement, the Preferred Equity Redemption and assuming that all Endeavor Operating Company Units or Endeavor Manager Units are redeemed or exchanged for newly-issued shares of our Class A common stock.

After giving effect to the reorganization transactions, the estimated impact of the tax receivable agreement, the Preferred Equity Redemption and assuming that all Endeavor Operating Company Units or Endeavor Manager Units are redeemed or exchanged in exchange for newly-issued shares of our Class A common stock on a one-for-one basis, and after giving further effect to the sale of 15,000,000 shares of Class A common stock in this offering at the assumed initial public offering price of $27.00 per share (the highpoint of the estimated price range on the cover page of this prospectus) and the application of the net proceeds from this offering, our pro forma as adjusted net tangible book deficit would have been approximately $(3,172) million, or $(13.49) per share, representing an immediate decrease in net tangible book deficit of $2.62 per share to existing equityholders and an immediate dilution in net tangible book deficit of $40.49 per share to new investors.

The following table illustrates the per share dilution:

 

Assumed initial public offering price per share

      $ 27.00  

Pro forma net tangible book deficit per share as of June 30, 2019(1)

   $ (16.11   

Decrease in pro forma net tangible book deficit per share attributable to new investors

     2.62     
  

 

 

    

Pro forma adjusted net tangible book deficit per share after this offering(2)

        (13.49
     

 

 

 

Dilution in pro forma net tangible book deficit per share to new investors

      $ 40.49  
     

 

 

 

 

(1)

Reflects 220,192,668 outstanding shares of Class A common stock, including 110,298,311 shares of Class A common stock issuable upon the redemption or exchange of Endeavor Operating Company Units and Endeavor Manager Units outstanding immediately prior to this offering in exchange for shares of Class A common stock on a one-for-one basis. Does not reflect the exchange of any Endeavor Profits Units for Endeavor Operating Company Units.

(2)

Reflects 235,192,668 outstanding shares, consisting of (i) 15,000,000 shares of Class A common stock to be issued in this offering and (ii) the 220,192,668 outstanding shares described in note (1) above.

Dilution is determined by subtracting pro forma net tangible book deficit per share after this offering from the initial public offering price per share of Class A common stock.

A $1.00 increase (decrease) in the assumed initial public offering price of $27.00 per share would increase (decrease) our pro forma net tangible book deficit after this offering by $15.0 million and the dilution per share to

 

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new investors by $0.06, in each case assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table sets forth, on a pro forma basis as of June 30, 2019, the number of shares of Class A common stock purchased from us, the total consideration paid to us and the average price per share paid by the existing equityholders and by new investors purchasing shares in this offering, at the assumed initial public offering price of $27.00 per share (the highpoint of the estimated price range on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and after giving effect to the reorganization transactions, the estimated impact of the tax receivable agreement, the Preferred Equity Redemption assuming that all Endeavor Operating Company Units or Endeavor Manager Units are redeemed or exchanged for newly-issued shares of our Class A common stock on a one-for-one basis, and after giving further effect to this offering and the application of the net proceeds from this offering:

 

     Shares of Class A
Common Stock Purchased
    Total Consideration     Average Price  
         Number              Percent         Amount      Percent     Per Share  

Existing stockholders(1)

     173,515,237        92.0     $3,204.8        88.8     $18.47  

New investors(2)

     15,000,000        8.0       405.0        11.2       27.00  
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

     188,515,237        100.0     $3,609.8        100.0  
  

 

 

      

 

 

      

 

 

(1)

Reflects approximately $3.2 billion of consideration paid by existing equityholders in respect of shares of Class A common stock and Endeavor Operating Company Units and Endeavor Manager Units (together with corresponding shares of Class X common stock). Does not reflect the exchange of any Endeavor Profits Units for Endeavor Operating Company Units.

(2)

Includes 15,000,000 shares of Class A common stock to be sold in this offering, the net proceeds of which we intend to use to make a contribution to Endeavor Manager in exchange for Endeavor Manager Units, which Endeavor Manager would then, in turn, contribute to Endeavor Operating Company in exchange for Endeavor Operating Company Units as described under “Use of Proceeds.”

To the extent the underwriters’ option to purchase additional shares is exercised, there will be further dilution to new investors.

A $1.00 increase (decrease) in the assumed initial public offering price of $27.00 per share of Class A common stock (the highpoint of the estimated public offering price range set forth on the cover page of this prospectus) would increase (decrease) total consideration paid by new investors in this offering by $15.0 million and would increase (decrease) the average price per share paid by new investors by $1.00, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

In addition, subject to certain restrictions, the holders of 10,398,847 Endeavor Profits Units, which have a weighted-average per unit hurdle price of $21.20 per Endeavor Profits Unit, will be able to exchange their Endeavor Profits Units into Endeavor Operating Company Units and paired shares of our Class X common stock and Class Y common stock, as described in “Organizational Structure.” The holders may subsequently acquire shares of Class A common stock upon the exercise of their redemption rights.

 

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma consolidated statements of operations for the year ended December 31, 2018 and the six months ended June 30, 2019 give effect to (i) the Preferred Equity Redemption, (ii) the reorganization transactions described under “Organizational Structure,” (iii) the creation or acquisition of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iv) the adoption of the 2019 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, and (v) this offering and the application of the net proceeds as described under “Use of Proceeds,” as if each had occurred on January 1, 2018. The unaudited pro forma consolidated balance sheet as of June 30, 2019 gives effect to (i) the Preferred Equity Redemption, (ii) the reorganization transactions described under “Organizational Structure,” (iii) the acquisition or creation of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iv) the adoption of the 2019 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, and (v) this offering and the application of the net proceeds from this offering as described under “Use of Proceeds,” as if each had occurred on June 30, 2019.

The unaudited pro forma financial information has been derived from Endeavor Operating Company’s historical consolidated financial statements to give effect to pro forma events that are directly attributable to the reorganization transactions and the offering, are factually supportable and, with respect to the pro forma consolidated statement of operations, are expected to have a continuing impact. The unaudited pro forma consolidated financial information reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions we believe are reasonable, but are subject to change.

Our historical financial information for the year ended December 31, 2018 has been derived from Endeavor Operating Company’s audited consolidated financial statements and accompanying notes included elsewhere in this prospectus. Our historical financial information for the six months ended June 30, 2019 has been derived from Endeavor Operating Company’s unaudited consolidated financial statements and accompanying notes included elsewhere in this prospectus. The unaudited pro forma financial information does not purport to be indicative of our results of operations or financial position had the relevant transactions occurred on the dates assumed and does not project our results of operations or financial position for any future period or date.

The unaudited pro forma financial information presented assumes no exercise by the underwriters of the option to purchase up to an additional 2,250,000 shares of Class common stock from us.

The unaudited pro forma financial information should be read together with “Capitalization,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our and Endeavor Operating Company’s respective consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

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Unaudited Pro Forma Consolidated Statement of Operations

Year Ended December 31, 2018

 

(In thousands, except per share
data)

  Endeavor
Operating
Company, LLC
Actual
    Adjustments
for the
Preferred
Equity
Redemption
    Adjustments
for the
Reorganization
Transactions
    As Adjusted
Before this
Offering
    Adjustments for
this Offering
    Endeavor
Group
Holdings, Inc.
Pro Forma
 

Revenue

  $ 3,613,478     $ —       $ —       $ 3,613,478     $ —       $ 3,613,478  

Operating expenses:

           

Direct operating costs

    1,722,134       —         —         1,722,134       —         1,722,134  

Selling, general and administrative expenses

    1,632,804       —         —         1,632,804       23,642 (b)      1,656,446  

Depreciation and amortization

    365,959       —         —         365,959       —         365,959  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    3,720,897       —         —         3,720,897       23,642       3,744,539  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income from continuing

    (107,419     —         —         (107,419     (23,642     (131,061

Other (expense) income:

           

Interest expense, net

    (277,200     (25,056 )(a)      —         (302,256     18,814 (i)      (283,442

Other income (expense), net

    57,519       —         —         57,519       —         57,519  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income taxes and equity losses of affiliates

    (327,100     (25,056     —         (352,156     (4,828     (356,984

Provision for (benefit from) income taxes

    88,235       —         (23,232 )(c)      65,003       (246 )(c)      64,757  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before equity losses of affiliates

    (415,335     (25,056     23,232       (417,159     (4,582     (421,741

Equity losses of affiliates, net of tax

    (48,359     —         —         (48,359     —         (48,359
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

    (463,694     (25,056     23,232       (465,518     (4,582     (470,100

Loss from continuing operations attributable to non-controlling interests

    (85,241     (41,194 )(a)(e)      (179,295 )(d)(e)      (305,729     14,845 (e)      (290,884
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations attributable to Endeavor Group Holdings, Inc.

  $ (378,453   $ 16,138     $ 202,527     $ (159,789   $ (19,427   $ (179,216
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma loss per share data:

           

Basic and diluted loss per share of Class A Common stockholders:

           

Continuing Operations

           

Basic

              (3.76

Diluted

              (3.76

Continuing operations attributable to Endeavor Group Holdings, Inc.

           

Basic

              (1.43

Diluted

              (1.43

Weighted average number of shares used in computing loss per share(f)

           

Basic

              124,894,366  

Diluted

              124,894,366  

See accompanying notes to unaudited pro forma financial information.

 

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Table of Contents

Unaudited Pro Forma Consolidated Statement of Operations

Six Months Ended June 30, 2019

 

(ln thousands, except per share data)

  Endeavor
Operating
Company, LLC
Actual
    Adjustments
for the
Preferred
Equity
Redemption
    Adjustments
for the
Reorganization
Transactions
    As Adjusted
Before this
Offering
    Adjustments
for this
Offering
    Endeavor
Group
Holdings, Inc.
Pro Forma
 

Revenue

  $ 2,048,552     $ —       $ —       $ 2,048,552     $ —       $ 2,048,552  

Operating expenses:

           

Direct operating costs

    1,085,919       —         —         1,085,919       —         1,085,919  

Selling, general and administrative expenses

    808,916       —         —         808,916       7,197 (b)      816,113  

Depreciation and amortization

    143,353       —         —         143,353       —         143,353  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    2,038,188       —         —         2,038,188       7,197       2,045,385  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income from continuing

    10,364       —         —         10,364       (7,197     3,167  

Other (expense) income:

           

Interest expense, net

    (142,084     (12,528 )(a)      —         (154,612     8,392 (i)      (146,220

Other income (expense), net

    (42,302     —         —         (42,302     —         (42,302
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income taxes and equity losses of affiliates

    (174,022     (12,528     —         (186,550     1,195       (185,355

(Benefit from) provision for income taxes

    (8,777     —         (17,489 )(c)      (26,266     1,165 (c)      (25,101
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before equity losses of affiliates

    (165,245     (12,528     17,489       (160,284     30       (160,254

Equity losses of affiliates, net of tax

    (50,051     —         —         (50,051     —         (50,051
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

    (215,296     (12,528     17,489       (210,335     30       (210,305

Loss from continuing operations attributable to non-controlling interests

    (27,718     (22,027 )(a)(e)      (87,593 )(d)(e)      (137,338     8,780 (e)      (128,559
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations attributable to Endeavor Group Holdings, Inc.

  $ (187,578   $ 9,499     $ 105,082     $ (72,997   $ (8,750   $ (81,746
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma loss per share data:

           

Basic and diluted loss per share of Class A Common stockholders:

           

Continuing Operations

           

Basic

              (1.68

Diluted

              (1.68

Continuing operations attributable to Endeavor Group Holdings, Inc.

           

Basic

              (0.65

Diluted

              (0.65

Weighted average number of shares used in computing loss per share(f)

           

Basic

              124,894,366  

Diluted

              124,894,366  

See accompanying notes to unaudited pro forma financial information.

 

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Table of Contents

Unaudited Pro Forma Consolidated Balance Sheet

As of June 30, 2019

 

(In thousands, except per interest and
share data)

  Endeavor
Operating
Company, LLC

Actual
    Adjustments
for the
Preferred
Equity
Redemption
    Adjustments
for the
Reorganization
Transactions
    As Adjusted
Before this
Offering
    Adjustments
for this
Offering and
the Use of
Proceeds (h)
    Endeavor
Group
Holdings, Inc.
Pro Forma
 

Assets

           

Current Assets:

           

Cash and cash equivalents

  $ 830,936     $ (77,689 )(a)    $ (76,779 )(g)    $ 676,468     $ 44,594 (h)    $ 721,062  

Restricted cash

    220,804       —         —         220,804       —         220,804  

Accounts receivable

    806,917       —         —         806,917       —         806,917  

Deferred costs

    132,416       —         —         132,416       —         132,416  

Other current assets

    165,230       —         —         165,230       —         165,230  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    2,156,303       (77,689     (76,779     2,001,835       44,594       2,046,429  

Property and equipment, net

    602,518       —         —         602,518       —         602,518  

Operating lease right-of-use assets

    399,981       —         —         399,981       —         399,981  

Intangible assets, net

    1,640,241       —         —         1,640,241       —         1,640,241  

Goodwill

    3,932,437       —         —         3,932,437       —         3,932,437  

Investments

    920,179       —         —         920,179       —         920,179  

Other assets

    351,935       —         (7,489 )(j)      344,446       (17,309 )(r)      327,137  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 10,003,594     $ (77,689   $ (84,268   $ 9,841,637     $ 27,285     $ 9,868,922  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities, redeemable interests and members’/shareholders’ equity

           

Current Liabilities:

           

Accounts payable

  $ 451,686     $ —       $ —       $ 451,686     $ (8,784 )(r)    $ 442,902  

Accrued liabilities

    324,329       —         —         324,329       —         324,329  

Current portion of long-term debt

    107,685       4,650 (a)      —         112,335       —         112,335  

Current portion of operating lease liabilities

    49,904       —         —         49,904       —         49,904  

Deferred revenue

    713,620       —         —         713,620       —         713,620  

Deposits received on behalf of clients

    218,542       —         —         218,542       —         218,542  

Other current liabilities

    159,601       —         —         159,601       —         159,601  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities