World Wrestling Entertainment Inc. Chairman Vince McMahon (L) and wrestler Triple H enter the ring during WWE Monday Night Raw at the Thomas & Mack Center on August 24, 2009
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“The unexpected loss of the services of Vincent K. McMahon may adversely affect our ability to create popular characters and creative storylines, or otherwise adversely affect our operating results,” WWE wrote in an official statement. corporate registration, from Dec. 31. “The loss of Mr. McMahon to unexpected retirement, disability, death, or other unexpected termination for any reason could have a material adverse effect on our ability to create popular characters and creative storylines, or could otherwise adversely affect our operating results”.
This sounds bad for WWE shareholders. So what happened to WWE stock when McMahon announced his surprise resignation after the call on Friday? They shot higher up more than 8% on Monday.
The surge was caused by increased investor sentiment about the upcoming sell-off. Newly appointed co-CEO Nick Khan had openly discussed the sales concept as early as this year, months before McMahon stepped down. Wall Street Journal investigation this revealed payments to women who reported sexual harassment and infidelity. Since then, WWE has confirmed a previously unrecorded $14.6 million expense paid personally by McMahon.
“If we say we are open for business,” Khan said. said in March on The Ringer’s “The Town” podcast.
The timing of the deal may depend on WWE’s upcoming U.S. television rights renewal, which is tentatively scheduled for mid-2023. The buyer may decide that it is more profitable to buy the company than to enter into a deal with temporary rights. Fox owns the rights to Smackdown and NBCUniversal owns the rights to Raw, two of WWE’s television channels. Both transactions close in the fourth quarter of 2024.
In a conversation with Matthew Belloni of The City, Khan singled out ComcastNBCUniversal as a potential buyer. Peacock of NBCUniversal currently owns the exclusive live broadcast rights to WWE.
“If you look at what NBCU/Comcast is missing from what they need, and I think that’s a factual statement, they don’t have the intellectual property that some other companies have. and shouldn’t,” Khan said. “I think they look at us as an organization with a treasure trove of intellectual property. Many of them haven’t been used yet… Now we have to properly monetize them and show the community what we have. “
Global media companies are on the hunt for intellectual property that they can use as the basis for recurring series and movies, as well as theme park rides for those who own them. WWE is also attractive as an acquisition because a media owner can sell real-time live advertising and potentially force audiences to pay for traditional pay TV, a shrinking but lucrative revenue stream. WWE’s “Raw” is currently airing on USA Network’s cable network, NBCUniversal. In comparison, the National Football League is almost doubled projected TV revenue in its latest renewal agreement last year.
WWE has consistently increased its annual revenue over the last decade through its media deals and live events. On Monday, it announced that second-quarter revenue is now expected to be $328 million for the quarter, up 23% from a year ago, and operating income of about $70 million, up 52% from a year earlier. .
Few entertainment companies in the world come up for sale at an easily digestible price for many potential fans. According to a person familiar with the matter, WWE is not in talks to sell. But McMahon’s retirement could open the floodgates to offers that could be too lucrative for the company to turn down. WWE, whose shares are up about 40% this year despite a broader decline in stocks, has a market value of about $5 billion. Shares fell about 3% on Tuesday after It is reported by The Wall Street Journal. McMahon’s payments were investigated by federal authorities.
Comcast, Disney, Warner Bros. Discovery, Paramount Global, Apple, Amazon as well as Netflix it all makes sense for the buyer given their streaming ambitions, MKM Partners analyst Eric Handler wrote in a note to clients.
A WWE representative declined to comment.
It is also possible that the new executive leadership is Khan; co-CEO and McMahon’s daughter Stephanie McMahon; Stephanie’s husband, Paul “Triple H” Levesque, will see this as the time to reform the WWE.
While the notion that Vince McMahon, still WWE’s largest shareholder, will not be involved in the company’s major decisions is skeptical, Levesque, who has taken creative control from McMahon, may have the opportunity to brush up on storylines and introduce new talent. McMahon, who turns 77 in August, no longer holds a senior position at the company.
McMahon may also see the sale now as a way out of weakness, which he may see as contradictory to his public persona of a man who is always at the helm.
“We suspect The Street will interpret Mr. McMahon’s resignation as a harbinger of a possible sale to WWE,” Citi analyst Jason Bazine said in a note to clients. “We are not sure this is a reasonable conclusion as WWE will continue to be a controlled company with 100% Class B shares owned by the McMahon family.”
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.
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