Endeavor latest black eye for IPO market, investors see companies as overpriced

Finance

Ari Emmanuel

Dan Steinberg | Invision | AP

In a surprising move, Endeavor pulled its IPO just before it was set to price, signaling a possibly softer market for other initial offerings, after a disappointing debut by Peloton Interactive earlier Thursday.

The difficult market environment for such high profile IPOs was seen as a negative for the broader market.

Endeavor Group Holdings was set to debut Friday, and the talent representation company said Thursday it would continue to evaluate the timing for its proposed offering as market conditions develop.

Endeavor had already lowered the range for the offering to between $26 and $27 a share and cut the number of shares to 15 million. It had planned an offer of 19.4 million shares at between $30 and $32 per share.

“”Demand is strong, just at values below this range,” said a source familiar with the offering. The source said investors still like the company but not at its proposed IPO price.

Earlier, Peloton, maker of high-end exercise bikes, had a weak first day on Wall Street, with the much anticipated IPO opening at $27 a shares, about 7% below its $29 offer price. Peloton ended the day down 11.2% at $25.76.

“It follows Peloton. It follows WeWork. It’s a whole IPO rethink. I think it has broader implications in terms of valuations. The market is saying we’re not going to keep paying these high multiples …These were the high profile ones going into the fourth quarter,” said Peter Boockvar, chief investmen officer at Bleakley Advisory Group.

Fifty-seven of 120 IPOs that have come public this year are trading below their offer price, according to Renaissance and CNBC data.

“Look at the action in technology. You look at software stocks that are trading at 20 to 30 times sales. I think it’s tech that has the more inflated valuations, and I t ink investors are just becoming more discriminating about valuations,” said Boockvar. “And these high profile IPOs, it’s still a valuation opinion. Just because it’s a private company trying to go public, this is investors questioning your valuations.”

Slack was trading about 13% below its offer price; while Uber was off nearly 30% and Lyft is about 40% below its offer price.

The weakness in the IPO market contrasts with some outstanding performers. Beyond Meat is the standout with a more than 500% gain since it went public in May. Palomar is up about 140%.

-Gina Francolla and Dom Chu contributed to this story

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