What the Initial Ironman IPO Filing Tells Us

On Friday, the Wanda Sports Group filed with the SEC to raise up to $500 million in an IPO for Ironman and its other sports holdings.

This initial draft filing offers some insight into the company’s finances, but will almost certainly be revised with more details after SEC review and before any shares are offered to the public. If you’re curious or have particular securities expertise, you can read the full 162-page filing.

The reason these kinds of SEC filings draw so much attention is because they often offer a rare look inside the financial workings of private companies, and there are some inferences that can be made from the Wanda Sports Group filing.

Wanda Sports Group is a subsidiary of the Chinese conglomerate Dalian Wanda. It incorporates Wanda’s Chinese sports holdings, Ironman—which includes the other mass participation events Ironman owns like the Rock n’ Roll events and the famous Cape Epic mountain bike race—and the Swiss sports marketing company Infront Sports & Media. The reason this matters is because Infront owns the media rights for a number of Olympic sports, as well as some media rights for the World Cup. It’s, arguably, a bigger company and draw for investors than Ironman alone.

The IPO will offer shares in the joint company—not just in Ironman. That also means the details of the various businesses are not separated out in the filing, so we can’t say for sure what kind of profit or revenue Ironman has been seeing.

The primary information about Ironman’s revenues and finances comes from a paragraph on mass participation segment of the business and Ironman’s revenue per athlete.

“Because it gives revenue numbers for the mass participation segment [of its business] in 2016, 2017, and 2018, and the percentages of that segment attributable to Ironman, we can extrapolate out the Ironman revenues for those three years,” said Kevin Scura, a triathlete and attorney with experience in SEC disclosures.

Wanda Sports says in its filing it had $1.29 billion in revenue in 2018, up from the year before, though profits have decreased this past year to $61 million. It also says its mass participation business accounts for about one-quarter of total revenue (around $320 million) and Ironman is about 29% of the mass participation segment—that percentage is down from 2017 and 2016 because of other acquisitions. It can be calculated then that Ironman’s revenue was about $91.9 million in 2018, $91.1 million in 2017, and $91.1 million in 2016. [These numbers are all converted from Euros listed in the filing.]

Interestingly, out of all the mass participation events Wanda owns and makes money off of, athlete entry fees make up the majority of the total revenue, around $140 million, while sponsorship revenue was another $78.3 million and host city fees—ie. how much a city pays to have an event—generated $28.8 million. Ironman, the filing notes, has higher athlete fees than other events, “…which we believe is a result of the high level of athlete engagement, the quality of event delivery, the strength of our brands and the attractive demographics of participating athletes in these events,” reads the filing. “Accordingly, these attributes increase the willingness of participants to pay a premium to take part in a coveted event.”

This initial filing also offers a general overview of the business, the industry’s growth potential, and any investor risks. The challenges the company faces largely have to do with any failure to adapt to the changing sports landscape or to retain existing media rights. The risks of expanding or failing to expand into new markets, especially China, is called out in particular. And in the triathlon industry, the filing also notes there are a number of potential risks with mass participation events generally, from safety and security to bad publicity around deaths and weather, or even damage to the brand because of perceptions of doping or infringement on intellectual property.

Noteworthy: Ironman pays Marvel a licensing fee for use of the “Ironman” brand; the agreement prohibits the company from suggesting any connection to Marvel’s Iron Man superhero.

The registration filing also calls attention to the growth of triathlon globally and how well Ironman is known as the premier brand in the sport. Any IPO comes with pros and cons, said Scura—going public makes a company more answerable to shareholders, which can make it harder to focus on long-term financial health, but it also opens up a new avenue for capital, which can fund future investments.

“One reason to be optimistic is that the registration statement clearly positions Ironman as a premium brand, and the flagship of the [company’s] mass participation segment,” said Scura.

The filing also said Dalian Wanda would continue to retain a majority of the voting power even after the Ironman IPO. That’s because the offering will include a dual class share structure—meaning those who have Class B shares (only individuals associated with Dalian Wanda) will have four times the voting power of those who purchase Class A shares in the offering.

“Whether it’s good or bad for an average triathlete that current management will retain more control depends on what you think of current management,” said Scura.

Wanda Sports also said in the filing it will use the money raised to pay off existing debt, with the rest for funding investments and general corporate use. While the registration filing did not yet disclose how much of a valuation Wanda Sports will seek or what percentage of ownership will be sold, Wanda originally purchased Ironman for $650 million (plus existing debt) and purchased Infront Sports & Media for $1.2 billion.

The Ironman IPO will be led by Morgan Stanley, Deutsche Bank AG, and Citigroup Inc, and is applying to be listed on the Nasdaq under the symbol WSG.