Analysis

Why Endeavor Group Stock Jumped Today

Shares of Endeavor Group (EDR 2.65%) were soaring on reports that private equity group Silver Lake was angling to buy the Hollywood talent agency.

As of 12:34 p.m. ET, the stock was up 23.1% on the news.

A standing ovation for Endeavor

Silver Lake is planning to make a bid for Endeavor, the massive talent agency run by Ari Emanuel, who was made famous in the HBO series Entourage. Endeavor owns a number of subsidiaries and is the majority owner of TKO Group, the parent of UFC and WWE.

Silver Lake already holds a 71% voting stake in Endeavor, making it likely that a deal will go through. Endeavor had also previously said it was considering strategic options for its individual businesses. 

In a statement, Silver Lake said, “Silver Lake is committed to strategies that deliver value for all shareholders of Endeavor. To that end, Silver Lake is currently working toward making a proposal to take Endeavor private.”

What’s next for Endeavor

It’s unclear at what price Sliver Lake would buy out the remainder of Endeavor, but the stock looks undervalued. Before today’s pop, it was trading at a market cap of $8.5 billion, yet TKO, the business that Endeavor owns 51% of is valued at nearly $14 billion, making the remainder of Endeavor’s assets business look discounted.

Endeavor hasn’t responded directly to the proposal and is likely awaiting a firm offer from the private equity group. Emanuel did say in a statement yesterday, “Given the continued dislocation between Endeavor’s public market value and the intrinsic value of Endeavor’s underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders.”

Given the relationship between the two companies and the strategic options that Endeavor previously announced, it seems likely that a deal will go through.

Expect the stock to be volatile until we know the details of the buyout offer.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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