”Endeavor is no Disney — they’re not a brand name outside of Hollywood — so they need help getting investors’ attention,“ one industry watcher says
Billionaire tech entrepreneur Elon Musk, the newest board member at Ari Emanuel’s Endeavor Group Holdings Inc., brings a new kind of star power to the financially troubled entertainment conglomerate that could drive a successful IPO, experts say.
But it’s Musk’s cult appeal rather than his business acumen that Endeavor is banking on for its second IPO attempt, said David Offenberg, an associate professor of finance at Loyola Marymount University focusing on the entertainment business. “Elon Musk is arguably one of the greatest entrepreneurs that the world has ever known. Any company would be lucky to have him advising their CEO and executive team,” Offenberg said.
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But, he added, “Endeavor is no Disney — they’re not a brand name outside of Hollywood — so they need help getting investors’ attention,” Offenberg told TheWrap. “Elon Musk has a huge pop culture following and is a master at drawing attention to things that interest him. So Endeavor is seemingly hoping Elon Musk’s presence will draw investors and give life to the stock.”
The 49-year-old Musk, who moves markets with a single tweet (sometimes to his own detriment), appeals to young Robinhood investors, a fast-growing part of the investment ecosystem, one Hollywood executive with experience launching startups said.
Bryan Sullivan, a partner at Early Sullivan Wright Gizer & McRae who focuses on entertainment and investment, added that Musk’s success with his own publicly traded companies lends some gravitas to the board that might appeal to the kind of large-scale hedge fund investors that tend to drive successful IPOs.
Musk is good for Endeavor, but Endeavor is also good for Musk. People with expertise in celebrity marketing power say Musk’s expanding insider status in Hollywood may offer new opportunities to market Musk’s own brands, including Tesla and SpaceX, through Endeavor-owned properties like the Ultimate Fighting Championship. “Imagine matching the UFC with the launch of a new Tesla model,” Umesh Ramakrishnan, veteran executive recruiter and co-CEO of Kingsley Gate Partners with expertise in celebrity board membership, told TheWrap. Added Ramakrishnan with a laugh, “He is not a stranger to finding all kinds of ways to communicate, including smoking some weed on a podcast. He’s able to push the envelope that far.”
There is no doubt it’s a major coup for financially troubled Endeavor to have Musk, the world’s second richest man (behind Amazon founder and CEO Jeff Bezos, according to Forbes) taking his place in the boardroom.
It also comes as no surprise that Endeavor chose to piggyback the news of Musk’s appointment onto the March 31 news that Endeavor has filed for an initial public offering for the second time in three years as a lure to attract new investors.
Adding Musk to the board makes for more encouraging news than Endeavor’s financials. According to the most recent financial disclosures, Endeavor took a $625.2 million net loss in 2020 despite pulling in $3.5 billion in revenue. For the full year 2019, it earned $4.6 billion in revenue and a net loss of $530.7 million. Over the last two years, that loss totals $1.2 billion. Musk’s joining the board may help renew confidence in Endeavor after its failed IPO in 2019, allowing Endeavor to perhaps gain traction with previous investors.
The losses are partly due to the load debt on its books since the acquisitions of IMG and UFC in the last few years, which ballooned to $5.7 billion by the end of 2020. That’s a 25.7% increase from two years before, when long-term debt totaled $4.5 billion, according to the IPO filings.
Clearly Musk, who is worth a reported $164 billion, isn’t joining the Endeavor board for the money, although some experts suggested the seat represents a chance for a tech entrepreneur to put his stamp on another area of business. “He’s already a billionaire, but he probably is excited by the opportunity to join the board of the first talent agency that’s going public,” Sullivan said.
Musk did not respond to requests for comment via Tesla and SpaceX representatives. However, industry watchers offer a number of solid reasons why Musk would devote time to Endeavor’s board while serving as CEO of the companies he co-founded: Tesla, SpaceX, Neuralink and The Boring Company.
First, Musk loves Hollywood. So an affiliation with a company that includes top talent agency WME and is led by super-agent Ari Emanuel, Musk’s longtime friend, is within his wheelhouse of interests. “There’s nothing like having proximity to one of the most powerful decision makers in the entertainment industry, with Ari and Endeavor,” said Eric Schiffer, CEO of The Patriarch Organization, a private equity and venture capital firm based in Los Angeles.
Even Musk’s board has an entertainment industry connection. Rupert Murdoch’s younger son James Murdoch, CEO of 21st Century Fox from 2015 to 2019, serves on the Tesla board.
Musk also is a media star on the celebrity romance front. The oft-married Musk had a baby last year with his longtime girlfriend, Canadian pop singer Grimes. The couple gave their son, born last May, the baffling name of X Æ A-12.
And it’s safe to say Musk is one of few, if any, tech entrepreneurs who has a profile on IMDb database as an actor and producer. His executive producer credits include the documentary shorts “The Rider and The Storm,” “Baseball in the Time of Cholera,” the doc feature “Dumbstruck,” the black comedy “Thank You for Not Smoking” and “Puzzled.” He also has made guest appearances on techie favorite series “The Big Bang Theory” and its spinoff “Young Sheldon.”
Musk has emerged as a pop culture figure in his own right, often compared to Iron Man alter ego Tony Stark from the Marvel Comics universe. He even made a cameo appearance as himself in the 2010 film “Iron Man 2,” directed by Jon Favreau and starring Robert Downey Jr. (see video below). It should perhaps be noted that Downey and his production banner, Team Downey, left CAA and signed with WME last year.
The Hollywood-Musk love affair continues with a planned limited series about SpaceX for HBO as well as an untitled SpaceX-NASA movie project that purportedly will call for sending actor Tom Cruise to be shot into outer space for an out-of-this world location shoot.
A board member for a major entertainment conglomerate agreed that Musk adores showbiz notoriety or, in fact, any kind of publicity. “That’s just kind of his big thing,” she told TheWrap.
Whether in the entertainment business or another area, the board member said it is unusual for a CEO to take on such a responsibility at mid-career. “What does surprise me is (Endeavor) getting a sitting CEO — typically we recruit CEOs that are just retiring because they have the time,” she said.
However, the board member also offered some sound business reasons why an outside board seat might benefit Musk. “CEOs who are still in growing pains would like to be on the other side, because it does give them broader experience,” she said, noting that at 49 Musk is relatively young for a CEO. “You’ll see that he’s really going to use this to his benefit…he’s getting into trouble with the SEC every time he turns around, it will help him to go on public board and see what not to do.”
The board member was referring to a 2018-19 battle in which the SEC charged Musk with posting misleading tweets saying he was considering taking Tesla private at $420 a share and had secured funding. The ensuing market turmoil caused harm to investors, regulators said. Tesla and Elon Musk each agreed to pay $20 million to financial regulators. Musk agreed to step down as the company’s chairman but remained as chief executive.
Ramakrishnan said Musk’s taste for Hollywood is only half of the story behind his new role at Endeavor. He believes Musk is keenly aware that the demographic for Tesla cars and even commercial space travel via SpaceX likely matches the demographic most interested in Endeavor entertainment content.
“Much as that may be in the tabloids, I think the guy really has a genius marketing mind,” Ramakrishnan said. “He’s known so much for tech breakthroughs and doing projects nobody else has thought of, but he didn’t become the second richest man on the planet by accident. You can dream up as many products as you want, but if somebody doesn’t buy them, you don’t make any money.”