When the window for new stocks closes, it closes quickly. Hollywood talent firm Endeavor scrapped its initial public offering on Thursday, and it’s easy enough to see why. Economic signals are worrying, and other new offers have met a frosty reception. Endeavor has unappealing qualities of its own, but at least it has the luxury of being able to wait.
Endeavor was the third company in a short period to test investors’ taste for unprofitable businesses with entrenched founders. WeWork, the office-share company, pulled its own listing after its mooted valuation plunged swiftly, and investors ganged up to oust leader Adam Neumann. Exercise-bike maker Peloton went ahead on Thursday, but its stock is already down around 13% from its IPO price. All three companies have multiple classes of shares, where public investors were being offered the kind with the least votes.
There are differences, however. Endeavor lost $193 million for the six months ended June 30. But the agency run by Ari Emanuel at least has a track record, having subsumed companies with roots dating back to 1898. It may not have fixed assets, like real estate, but it has famous ones – its properties include martial arts brand UFC. That gives it a competitive moat Peloton, for example, lacks. It was raising money to pay down $325 million of debt and make acquisitions, but hardly has the urgency of WeWork, which had lined up bank loans contingent on a successful market listing.
Once fear has set in, it’s likely other IPO wannabes will have second thoughts. The market was already troubled by trade war and political dysfunction. U.S. business investment fell 1% last quarter, while the Conference Board’s regular consumer confidence index plunged in September. Once risk appetite recedes, stock listings end up divided between those that can’t float, those that shouldn’t even be trying, and those with the flexibility to decide it’s better if they don’t. Endeavor can take comfort from being in that third bucket.