In today's financial world, it is possible to invest in virtually anything. From sports to tech, everything is covered. In this article, we will discuss how to invest in the Ultimate Fighting Championship (UFC), one of the biggest combat sports leagues in the world.
The league hosts fight cards almost every weekend in the US, Mexico, Brazil, Europe, and, more recently, the Emirates. Fans can attend these events in person or purchase a pay-per-view (PPV) subscription for fights and additional content surrounding the athletes and UFC life. Those same fans might wonder if they can own a portion of the UFC.
Since April 2021, shares have been available for purchase (NYSE: EDR). This company owns UFC, as well as other major televised events and entertainment industries. Endeavor purchased World Wrestling Entertainment (NYSE: WWE) and created a company worth more than $21 billion. This transaction combined talent, entertainment, and live sports. Let’s find out more about UFC, WWE, and Endeavor Holdings.
The Early Days of UFC
The UFC was founded in 1993. A group of investors and fighters, including Rorion Gracie, sought to create a real-life Street Fighter or Mortal Kombat. They wanted to allow diverse fighters worldwide to show their fighting talents. Boxing already had a stage, fans, and a very impressive talent pool, such as Mike Tyson and Muhammad Ali, to name a few. UFC wanted to become the next big fighting league. That could make UFC stock more popular with investors.
The first few years were difficult, as with many new companies. Convincing fighters to join a league and compete in front of millions of fans isn’t as easy as it seems. In 2001, the Fertitta brothers purchased the company for $2 million. UFC’s current president, Dana White, became the president.
Read also: WWE Stock Insights
Fast forward to 2016, when Endeavor Group acquired 50.1% of the company, becoming the majority shareholder for $4 billion. The sale represented nearly a 200,000% gain for the Fertitta brothers. By 2016, the UFC had many global superstars, including Anderson Silva, Brock Lesnar, and Georges St-Pierre. It wasn’t as difficult to attract new talent anymore.
Endeavor's Acquisition and IPO
Back to Endeavor. The group already controls many entertainment companies; more on that will be discussed in the next section. Its goal with UFC was to control 100% of it and to go public. In 2019, it was a few days short of going public, but unfavorable market conditions led the owners to pull the plug. Two years later, in 2021, Endeavor went public and used the proceeds to acquire the remaining UFC stake for $1.75 billion. Many UFC fighters bought shares in the company.
Endeavor aims to raise about $511 million with its initial public offering that will value the parent company of WME and UFC at about $10 billion. Early Tuesday, Endeavor filed its full prospectus with the Securities and Exchange Commission. The company aims to sell 21.3 million shares priced at $23-$24 per share. Endeavor is also doing a private sale of preferred shares to raise about $1.7 billion in order to buy out the remaining 49% of UFC that it does not already own.
The company plans to use $835.7 million of the funds for the UFC buyout, coming five years after Endeavor acquired the 50.1% majority stake in the mixed martial arts promoter for $4.4 billion in 2016. Firms taking part in the private placement include China’s Tencent, Elliott Investment Management, Mudabala Investment Co., Capital Research and Management, Third Point, Tako Ventures, Zeke Capital Advisors and Silver Lake Partners.
Following the IPO, Silver Lake - Endeavor’s longtime private-equity backer - will own 68.4% of the voting shares in the company. Endeavor CEO Ari Emanuel, executive chairman Patrick Whitesell and entities that they control will hold 20.8%. That makes it a “controlled company” along the lines of ViacomCBS or Comcast with a dominant shareholder class.
Post-IPO, new investors in Endeavor would own 0.4%-0.5% of the voting shares (and 5% of total outstanding shares on a diluted basis). The company also granted the offering’s underwriters the option to purchase up to an additional 3.195 million Class A shares.
The Unstoppable Rise of the UFC: From Underground Fights to Global Domination
Endeavor's Network of Holdings
In the previous section, I mentioned that Endeavor (UFC stock) owns many entertainment companies. Are you familiar with any of them?
Miss Universe
One of the most popular was the Miss Universe pageant. Despite a decline in popularity, the yearly pageant attracts nearly half a billion viewers and is broadcast in 190 countries. It’s hard to undermine the popularity of this event, but economically, it became less and less favorable by the year. That is why Endeavor (UFC stock) sold the organization for approximately $20 million.
IMG
Next on the list is IMG, a global leader in managing athletes and fashion icons. IMG represents talent and has a presence in various leagues, including the Premier League, UEFA Champions League, the European Championship, Major League Baseball, and others. It advises and owns teams as well as organizes events and media events. IMG is a very important player in the sports industry. This includes UFC stock.
OpenBet
We continue with one of Endeavor’s latest acquisitions, sports betting company OpenBet. (NASDAQ: LNW). Endeavor is seeking to expand its sports portfolio through a gambling application. OpenBet processes bets on behalf of DraftKings, FanDuel, SkyBet, and more. The company is growing and contributing to Endeavor’s (UFC stock) success.
WWE
In early 2023, a deal was struck between Endeavor (the parent company of UFC stock) and WWE. In the second half of 2023, a new company, listed under the stock ticker (NYSE: TKO), was formed once all regulatory hurdles were satisfied.
Endeavor shareholders will represent 51%, and WWE will be 49%. The new company is expected to have an estimated value exceeding $21 billion. Once the transaction is complete, a one-time dividend will be paid. Dana White, Vince McMahon, and other major leaders will remain in their respective roles. WWE’s wrestling may not be real, but its revenue exceeded $1 billion last year.
Celebrities from various industries, including Snoop Dogg, Bad Bunny, Shaquille O’Neal (also known as Shaq), Logan Paul, and Kim Kardashian, among others, regularly participate in its events. The merger will likely enable UFC superstars to perform alongside them and attract an even bigger crowd. Let’s see what SmackDown events will be like after the transaction.
Financial Performance and Future Outlook
In its registration statement filed last month, Endeavor reported revenue of $3.5 billion for 2020 and a net loss of $625.3 million. The company previously sought to go public in 2019 but pulled the IPO at the last minute.
“The events of 2020 reminded us of the enduring value of premium intellectual property and content, while reinforcing the strength of our position within the sports and entertainment ecosystem,” Emanuel wrote in a letter included with the prospectus. “We believe being a public company will enable us to accelerate this mission and further the vision we set out in 1995 to build a company for where the world was headed. We hope you’ll join us.”
Endeavor - parent company of WME, UFC and other sports and entertainment properties - disclosed two recent acquisitions in the latest filing. On Jan. 14, 2021, the company agreed to pay $200 million for the “path-to-college” business of Reigning Champs, which comprises companies that offer recruiting and admissions services and related software products to high school student athletes and college athletic departments and admissions officers. In addition, Endeavor on April 1 closed a $60 million deal to buy EDH Tennis, the holding company of FlightScope Services, a data collection, AV production and tracking technology specialist for golf and tennis events. Endeavor paid $35 million upfront for FlightScope, with the remainder to be paid in two instalments in 2022 and 2024.
The company said it plans to use the net proceeds from the IPO and the private placements for “working capital and general corporate purposes,” as well as “to fund our current or future joint ventures, investments or acquisitions of complementary businesses or other assets,” including the Reigning Champs acquisition.
Endeavor said it applied to list its Class A common stock on the New York Stock Exchange under the symbol “EDR.”
As previously disclosed, Endeavor reported that 43% of 2019 revenue came from its Events, Experiences and Rights division, which includes IMG Events, IMG Academy, IMG Arena, IMG Media and the On Location high-end hospitality services firm. The Representation unit - which houses WME, IMG, Endeavor Content, IMG Licensing and marketing firm 160 Over 90 - accounted for 36% of 2019 revenue, and Owned Sports Properties, comprising UFC, PBR and Euroleague Basketball, delivered 20% of 2019 revenue.
Is UFC stock a good investment for the long term? In 2019, Endeavor as a whole experienced a 26% growth. Unfortunately, in 2020, revenue dropped 24%. Consequently, the bottom line suffered, and the company reported a net loss of $655 million.
In 2022, Endeavor had over $5 billion in debt and less than $1 billion in cash. This can be worrying in the long term. This resulted from ambitious purchases from IMG, UFC, and now WWE.
In its most recent quarterly report, revenue totaled $1.26 billion, led by a record year for UFC. Despite a positive EPS, revenue has been falling. The company is positioning itself as a middleman for streaming services, which is likely to drive growth in the upcoming quarters.
Endeavor is looking to bounce back and capitalize on the sports and betting industry to accelerate growth and repay its debts. The next quarters will be crucial for its long-term outlook.
We can still remember the pandemic days around the world when many businesses were closed and patiently waiting to reopen. Some companies, such as UFC, have successfully scheduled events abroad, notably on Yas Island in the United Arab Emirates (UAE). Despite this good thinking, revenues remained well below pre-pandemic levels.
Endeavor noted that under WME’s agreement with the WGA struck in February, the company is precluded from owning 20% or more of a production company.
To conclude, if you want to trade UFC stock, you can do so under (NYSE: TKO). Endeavor owns companies that complement each other’s businesses and a recognizable leadership group. We can find one of their events in cities worldwide almost every week. Can its stock become as popular as its events? Time and good financial decisions will reveal the truth.
| Company | Stock Ticker | Ownership |
|---|---|---|
| Endeavor Group Holdings | NYSE: EDR (formerly) | Parent company of UFC |
| World Wrestling Entertainment (WWE) | NYSE: WWE (formerly) | Merged with UFC under TKO Group Holdings |
| TKO Group Holdings | NYSE: TKO | New company formed by the merger of UFC and WWE |