President of World Wrestling Entertainment Inc. Vince McMahon (L) and wrestler Triple H appear in the ring during WWE Monday Night Raw at the Thomas & Mack Center August 24, 2009
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“The unexpected loss of Vincent K. McMahon’s service may adversely affect our ability to create popular characters and creative storylines, or may adversely affect our operating results. “, WWE wrote in company profileDecember 31. “Mr. McMahon’s death due to unscheduled retirement, disability, death or unscheduled termination for any reason may have adversely affected our ability to create employees. famous characters and storylines that are innovative or may adversely affect performance.”
That doesn’t sound good to WWE shareholders. So, what happened to WWE stock when McMahon announced his surprise retirement after Friday’s bell? They shoot higher, up more than 8% on Monday.
The spike was fueled by heightened investor sentiment that a sale was imminent. Newly appointed co-CEO Nick Khan publicly discussed the sale concept already this year, months before McMahon stepped down amid the a Wall Street Journal investigation disclose payments to women who claim to have committed sexual misconduct and infidelity. WWE has since confirmed $14.6 million in previously unrecorded expenses paid personally by McMahon.
“As we say, we are open for business,” Khan said in March on The Ringer’s podcast “The Town”.
The length of a deal could depend on WWE’s upcoming renewal of the US television rights, loosely scheduled for mid-2023. The acquirer may decide it makes more sense to buy the company than to buy the company. make a temporary rights agreement. Fox owns the rights to “Smackdown” and NBCUniversal owns the rights to “Raw,” two WWE TV properties. Both transactions close in the fourth quarter of 2024.
Talking to Matthew Belloni about “The Town”, Khan said Comcastof NBCUniversal as a potential buyer. NBCUniversal’s Peacock currently owns the exclusive rights to live stream for WWE.
“If you look at what NBCU/Comcast lacks that they need, and I think that’s a factual statement, they don’t have the intellectual property some of the other companies have. They certainly don’t have the IP treasure trove of their own. Disney, Khan said. “I think they see us as an entity with a treasure trove of intellectual property. A lot of it remains untapped…. Now we depend on monetizing properly and showing the community exactly what we have. “
Global media companies are on the hunt for intellectual property that they can use as the basis for TV series and period series as well as theme park attractions for owners. own them. WWE is also attractive as an acquisition because media owners can sell real-time advertising on live programming and potentially keep audiences paying for traditional pay TV, a diminishing but profitable source of revenue. WWE’s “Raw” currently airs on USA Network, an NBCUniversal cable network. For comparison, the National Football League is almost TV revenue expected to double in the most recent renewal agreement last year.
WWE has consistently grown in revenue year on year over the past decade on the strength of media deals and live events. It announced second-quarter revenue on Monday that is now expected to be $328 million for the quarter, up 23% from a year ago, with operating income of about $70 million, up 52% from the previous year. a year earlier.
There are not many entertainment companies with a global scale that offer a price that is understandable to many potential suitors. WWE is not involved in the purchase and sale negotiations, according to a person familiar with the matter. But McMahon’s retirement could open the floodgates to offers that might have been too good for the company to turn down. WWE, have their stock up about 40% this year in contrast to a more widespread stock decline, has a market valuation of about $5 billion. Stocks closed down more than 3% on Tuesday, after The Wall Street Journal reported McMahon’s payments are under federal investigation.
A WWE spokesperson declined to comment.
Might as well be the new executive leadership – Khan; co-CEO and McMahon’s daughter, Stephanie McMahon; Stephanie’s husband, Paul “Triple H” Levesque – will see this as a time to reshuffle WWE.
While it’s stressful to think that Vince McMahon, still WWE’s largest shareholder, won’t be involved in major company decisions, Levesque, who has taken over creative control from McMahon, could get the chance to refresh the plot and introduce new talent. McMahon, who turned 77 in August, no longer has any executive titles at the company.
McMahon might also see selling now as coming out of a weakness, which he might see as contrasting with his overt personality as someone who has always been in charge.
“We suspect Street would interpret Mr McMahon’s retirement as the premise for the eventual sale of WWE,” Citi analyst Jason Bazinet said in a note to clients. “We’re not sure that’s a logical 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.