WGA Tells SEC That Endeavor IPO Filing Misrepresented Risk To Potential Investors; Endeavor Says Guild “Misrepresenting The Facts” – Update
UPDATED with Endeavor statement: The WGA told the Securities and Exchange Commission on Monday that Endeavor’s IPO registration last month inaccurately reported its client numbers, a claim Endeavor has rejected.
“In its IPO Registration Statement, Endeavor claims to represent over 6,000 clients including the ‘world’s most dynamic and engaging storytellers,’” said Laura Blum-Smith, WGA West Director of Research and Public Policy. “But as a result of Endeavor’s conflicted business practices, 1,400 writers have informed the agency that it no longer represents them, a fact that Endeavor fails adequately to disclose to potential investors. Endeavor’s reliance on clients and failure to address these conflicted practices make this offering a risky investment.”
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Read the full letter here.
“Endeavor’s talent representation segment, including William Morris Endeavor, is a core component of its business,” the guild said in a statement. “Before April 13, WME represented numerous film and television writers belonging to the WGA. Since that date, however, 1,400 WGA writers have terminated their relationships with the agency. While Endeavor’s filing states that ‘the agency has received termination letters from a majority of its writer clients for the commissioning of writing representation services,’ it hasn’t disclosed the actual number of writers who have left the agency, or adjusted its reported client base to reflect this substantial loss.”
In a letter sent today to William Hinman, director of the SEC’s Division of Corporation Finance, the WGA states: “In the draft Form S-1 Registration Statement submitted to the SEC on February 14, 2019, Endeavor reports representing the same ‘over 6,000 clients’ reflected on its May 23 statement. But between these two dates, approximately 23% of this stated client base informed Endeavor that the agency no longer represents them for employment under WGA’s collective bargaining agreement. We believe this information is material to the risks of investing in Endeavor and must be disclosed.”
In determining that the 1,400 writer-clients who fired WME accounted for 23% of all of its clients, the guild relied on Endeavor’s rather imprecise statement that WME has “over 6,000 clients.” If the actual number of all of its clients is significantly higher than 6,000, the 23% figure cited would be significantly lower. In addition, many of the writers who terminated WME as writers are still represented by the agency in other areas, such as producing, directing and acting.
Endeavor responded later Monday by saying that “Once again, in an attempt to disrupt our business, WGA leadership is misrepresenting the facts. Endeavor has clearly stated that it has ‘more than 6,000 clients.’ This is not a static number, given the fluidity of the client business, and is still accurate today even after the departure of our former writer clients.”
On April 12, the WGA ordered all of its members to fire their agents who refuse to sign its new Agency Code of Conduct, which bans packaging fees and agency affiliations with corporately related production entities. At last count, more than 7,000 WGA members have fired their agents. Last week, the guild said it had reached an impasse in its negotiations with the Association of Talent Agents, saying it will try to reach agreements with individual agencies instead.
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