Wall Street continues to take a highly suspicious view of the IPO market.
Endeavor Group, Hollywood’s biggest talent agency owner, is the latest private firm to find that out the hard way. The company, run by Ari Emanuel, scrapped its IPO on Thursday at the last minute after failing to achieve its desired valuation.
The failed IPO is yet another sign that investors are reassessing the wisdom of betting on unproven companies, especially during a time of elevated recession risk. Endeavor’s decision to yank the IPO came just hours after the shaky debut on Wall Street for indoor fitness brand Peloton (PTON).
“IPO investors are on strike,” said Kathleen Smith, principal at Renaissance Capital, which runs Renaissance IPO ETF (IPO).
Beverly Hills, Calif.-based Endeavor was aiming to go public on Friday, marking a milestone for a company that owns mixed martial arts league UFC and talent agency WME.
But the IPO was met with resistance from Wall Street, forcing Endeavor to dial back its proposed trading range to $26 to $27, down from $30 to $32 previously. Endeavor eventually abandoned the offering altogether.
“Endeavor will continue to evaluate the timing for the proposed offering as market conditions develop,” the company said in a statement.
Market conditions have not been favorable for IPOs, despite what was supposed to be a banner year.
Peloton–which sells $4,000 treadmills and $1,995 spin bikes, and streams fitness classes for $39 a month–almost immediately broke below its IPO price on Thursday. Earlier this month, online braces seller SmileDirectClub (SDC) plunged more than 25% in its debut, the worst first-day for a US unicorn in 2019.
The poor performances of Uber (UBER) and Lyft (LYFT), both of which went public earlier this year, have left investors on high alert for problem startups. The ridesharing companies are trading well below their IPO prices.
“Until the recently public companies provide positive returns for investors, they won’t buy new ones,” said Smith.
But at least Uber, Lyft, SmileDirectClub and Peloton pulled off their respective IPOs.
WeWork’s IPO rollout was an utter disaster.
The co-working company, previously one of the startup world’s brightest stars, had to abandon its IPO after potential investors shuddered at its epic losses and questionable corporate governance structure. Adam Neumann, the face of WeWork, stepped down as CEO and the company is reportedly doing a housecleaning that includes selling the former boss’s favorite private jet.
To be sure, there have also been some big IPO wins this year.
Video-conference company Zoom (ZM) has more than doubled since going public in April. And Beyond Meat (BYND) is riding the meatless food boom to unbelievable heights. Beyond Meat (BYND) is trading at about $150, or roughly six times its IPO price of $25.
The risk is that the next Beyond Meat is scared off from going public by the circumspect mood that has taken hold in the IPO market.