The chairman of World Wrestling Entertainment Inc. Vince McMahon (left) and wrestler Triple H appear at ringside during the WWE Monday Night Raw show at the Thomas & Mack Center, August 24, 2009.
Ethan Miller | Getty Images Entertainment | Getty Images
World Wrestling Entertainment’s 2021 annual report lists a risk factor specifically for the fallout from Vince McMahon’s retirement — an event that happened last week.
“The unexpected loss of the services of Vincent K. McMahon could adversely affect our ability to develop popular characters and creative storylines or otherwise adversely affect our operating results,” WWE wrote in a Dec. 31 corporate filing. “The loss of Mr. McMahon due to unexpected retirement, disability, death or other unexpected termination for any reason could have a material adverse effect on our ability to develop popular characters and creative storylines or otherwise adversely affect our operational results.’
That sounds bad for WWE shareholders. So what happened to WWE stock when McMahon announced his unexpected retirement after the bell on Friday? They rallied, rising more than 8% on Monday.
The jump was due to heightened investor sentiment that a sale was imminent. Newly appointed co-CEO Nick Hahn openly discussed the concept of a sale earlier this year, months before McMahon stepped down amid a Wall Street Journal investigation that revealed payments to women who alleged sexual abuse and infidelity. WWE has since confirmed $14.6 million in previously unreported expenses paid by McMahon personally.
“As we say, we’re open for business,” Hahn said in March on The Ringer’s “The Town” podcast.
Potential buyers
The timing of the deal may depend on the upcoming renewal of WWE’s US television rights, which is set for mid-2023. An acquirer may decide that it makes more sense to purchase the company than to strike a temporary rights deal. Fox owns the rights to “Smackdown” and NBCUniversal owns the rights to “Raw,” both WWE TV properties. Both deals close in the fourth quarter of 2024.
Speaking with “The Town’s” Matthew Belloni, Khan singled out Comcast’s NBCUniversal as a potential buyer. NBCUniversal’s Peacock currently holds the exclusive live streaming rights for WWE.
“If you look at what NBCU/Comcast lacks, which they need, and I think this is a factual statement, they don’t have the intellectual property that some other companies have. They certainly don’t have Disney’s treasure trove of IP, nor should they,” Hahn said. “I think they see us as an organization that has a treasure trove of intellectual property. Much of it is still untapped… Now it’s up to us to monetize it properly and show the community exactly what we have. “
Global media companies are on the hunt for intellectual property they can use as the basis for recurring TV series and movies and theme park attractions for those who own them. WWE is also attractive as an acquisition because the media owner can sell real-time advertising on live programming and potentially get audiences to pay for traditional pay TV, a declining but lucrative revenue stream. WWE’s “Raw” currently airs on the USA Network, an NBCUniversal cable network. By comparison, the National Football League nearly doubled its projected television revenue in its last rights renewal deal last year.
WWE has steadily increased annual revenue over the past decade thanks to its media deals and live events. It said Monday that second-quarter revenue is now expected to be $328 million for the quarter, up 23% from a year ago, with operating income of about $70 million, a 52% increase from a year earlier.
There are not many entertainment companies of global scale that are offered for sale at a price that is easily digestible for many potential suitors. WWE is not in talks to sell, according to a person familiar with the matter. But McMahon’s retirement could open the door to a flood of offers that might be too good for the company to turn down. WWE, whose shares are up about 40% this year despite broader stock declines, has a market valuation of around $5 billion. The stock fell about 3% on Tuesday after The Wall Street Journal reported that McMahon’s payments were being investigated by federal authorities.
Comcast, Disney, Warner Bros Discovery, Paramount Global, Apple, Amazon and Netflix make sense to acquire given their streaming ambitions, MKM Partners analyst Eric Handler wrote in a note to clients.
A WWE spokesperson declined to comment.
Jumping the gun?
Also possible is the new executive leadership – Cannes; co-CEO and McMahon’s daughter Stephanie McMahon; Stephanie’s husband, Paul “Triple H” Levesque – will see this as a time to reform WWE.
While it’s far-fetched to think that Vince McMahon, still WWE’s largest shareholder, won’t be involved in the company’s major decisions, Levesque, who took over creative control from McMahon, may have the opportunity to freshen up the storylines and introduce new talents. McMahon, who turns 77 in August, no longer holds executive positions at the company.
McMahon may also view the sale now as an exit from weakness, which he may see as antithetical to his public persona as someone who is always on top.
“We suspect the Street will interpret Mr. McMahon’s retirement as a precursor to an eventual sale to WWE,” Citi analyst Jason Bazinet said in a note to clients. “We’re not sure that’s a reasonable conclusion, as WWE will still be a controlled company with 100% of the Class B shares held by the McMahon family.”
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.
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