WWE has paradoxically pinned itself to the mat. Late last week, the US company that produces professional wrestling events said that its founder and former chief executive, Vince McMahon, would return to the company’s board.
McMahon left the company last year amid scandal. A WWE board investigation revealed he had personally made almost $20mn of secret payments. Those payments should have been reflected in company financial statements.
Such a breach would typically be a career killer. But McMahon owns 40 per cent of WWE shares and, through dual-class shares, controls 80 per cent of the vote. McMahon claims he has returned to the ring to assist in a potential sale of WWE, a potential blockbuster transaction.
The likely buyers now struggle with rising costs just as subscriber growth for their streaming platforms has plateaued. WWE, with an enterprise value of more than $6bn, still commands a loyal audience of viewers and consumers. As a result, the share price has leapt 30 per cent since December.
In its past 12 months reported, WWE has generated about $400mn in operating profit. The bulk of its earnings come from media rights sold to broadcasters such as Comcast and Fox. These rights have escalated in price in recent years. Networks have paid up to keep consumers watching their legacy “linear” networks, while also investing in streaming.
A large media acquirer — such as Comcast, Fox or Disney — could avoid paying these fees by owning WWE outright. At the same time, companies that specialise purely in the production of content might want WWE as a way to reach young, male audiences.
Within the media sector, however, there exists a graveyard of botched integrations. Moreover, the stock prices of big media groups fell, in some cases, more than 30 per cent in 2022. McMahon and WWE typically write the scenario endings in advance for the big bouts. This time, the WWE sale should prove a real cliffhanger.
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