Opinion: Endeavor Filings Reveal a Separate UFC IPO is Real Possibility

By Patrick Auger Aug 9, 2019
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On Aug. 2, the Wall Street Journal reported that Ultimate Fighting Championship parent company Endeavor had pushed back their IPO offering until September at the earliest. The reason given was that the company was currently in the middle of acquiring On Location Experiences LLC, a premium hospitality company that caters to live event experiences (think UFC VIP Experience type offerings) as well as a “material weakness” in their internal controls over financial reporting. While it would make sense for the company to wait until the acquisition is complete so that they could report stronger Q2 financials and hopefully boost the price of the IPO, the issue with the financial controls could become an issue depending on what the specific problem is, though internal sources seem to indicate its not a showstopper.

While Endeavor’s IPO has been on the radar of mixed martial arts fans for quite some time and will no doubt have an impact on the UFC, buried in the filings of the public offering is an interesting bit of information that only a few fans and pundits have seemed to notice -- there are mechanisms in place for the UFC to be offered in its own IPO.

The section of the filing that discusses a separate UFC IPO reads as follows:

“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 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, provided 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.”

What this language essentially says is that if Endeavor or the two minority shareholders of the UFC, Silver Lake Partners and Kohlberg Kravis Roberts (KKR), decide they want the UFC to go public, as long as certain requirements are met they have a legal right to force the UFC to do so. As we’re already past Feb. 18, 2019, subsection (i) is no longer applicable, but areas (ii) and (iii) are still very much in play. From now until Aug. 18, 2021, an IPO for the UFC is possible if at least one director from Endeavor, Silver Lake, and KKR requests or approves it (three total), but if the valuation reaches a certain dollar amount it only requires approval from any two directors (although if Endeavor holds the majority of shares as they do now, the Endeavor director must approve it no matter what the circumstances are). After Aug. 18, 2021, Endeavor, Silver Lake, or KKR can demand that the UFC go public without approval from any of the other groups or its directors depending on the specifics of the UFC LLC Agreement and ownership rights.

Given that Endeavor holds the majority of shares in the UFC and is currently trying to launch its own IPO, it's unlikely they would approve a public offering of the MMA promotion anytime soon. The talent agency still has to see where its share price will end up all while making the often rough transition from private to publicly-traded company, and since the UFC is one of Endeavor’s most profitable assets, a second related offering would create an enormous amount of volatility for the organization. Also, with multiple lawsuits currently being levied against the promotion, it would be a much safer move for Endeavor to see how those resolve before trying to go public with the UFC.

After August of 2021, however, things get much more interesting. An offering would still have to be in accordance with the UFC LLC Agreement and the group requesting it would need to meet the minimum ownership requirements, but no formal approval from any of the other partners or the board of directors would be required. If KKR, the shareholder with arguably the least amount of exposure in the agreement (more on that later) wanted the UFC to go public, they could force the company to do so even if Endeavor and Silver Lake both vehemently objected. That goes for any of the three conglomerates involved, making a UFC IPO far easier to achieve and much more likely after the Aug. 18, 2021 date outlined.

Although UFC President Dana White has openly stated that he does not want the UFC to go public, these filings prove that the decision is out of his hands. With more guaranteed revenue coming in and important long-term partnerships being forged between the promotion and broadcast partners around the world, a public offering for the company certainly seems like it's on the horizon. While Endeavor seemingly has the final say on that decision until 2021, it is important to note that Silver Lake holds a majority stake in Endeavor, meaning that any decision to pull the trigger on a UFC IPO between now and then would most likely require their signoff as well. The next few years will be very telling as to whether or not the UFC makes the leap from private to public, and given everything that has happened since the company’s purchase in 2016, its not hard to imagine the letters “UFC” on a stock ticker in the future. Advertisement
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