WWE business took a major hit this week when the company announced their new television agreement with NBCUniversal, one that will see RAW and SmackDown remain in their respective cable homes. While the company managed to secure a relatively healthy increase in rights fees as part of the new agreement, the results didn’t match the heavy expectations, as NASCAR and Major League Soccer received substantial increases, leading to speculation that WWE would follow-suit.
As a result of the lack of increase, WWE stock plummeted this week. On March 17th, WWE stock was valued at $30.37 per share. As recently as today, WWE stock was valued at $11.88 per share today, with value of WWE’s common stock falling between $8.25 and $11.88 per share with current management in place.
Meanwhile, Lemelson Capital, LLC, a private investment management firm, announced today that they had taken a stake in shares of WWE stock and called on the Board of Directors to replace the “executive management team” of the company due to a period of consistent losses, execution issues and material misstatements.
“WWE has affirmed that even with one million subscribers for its WWE network, the company stands to lose between $45 million and $52 million in FY 2014, which validates the original short thesis,” said Emmanuel Lemelson, Chief Investment Officer of Lemelson Capital Management. “This follows what we believe to be material misrepresentations by the company about both the performance and operating profit model of its WWE network, which the company has wrongly labeled ‘a home run'”
WWE responded to some of the issues in a press release on Thursday, noting that Vince McMahon and George Barrios will host a conference call on Monday, May 19th, to discuss WWE’s business outlook.
“We continue to achieve significant increases in the value of our largest television agreements, a key component of our business plan” stated Vince McMahon, Chairman and Chief Executive Officer. “The rising value of our content coupled with the global expansion of WWE Network will provide the foundation for long-term growth that continues to transform our business over the coming years.”
“With the favorable renegotiation of our largest television agreements, WWE transitions to a subscription-based business model for future growth,” added George Barrios, Chief Strategy & Financial Officer. “Successful execution of our WWE Network strategy could significantly raise the Company’s earnings profile and better reflect WWE’s tremendous global appeal and brand strength. With such execution, the Company anticipates sufficient financial resources, including debt capacity, to fund growth, support ongoing business requirements and maintain its current dividend.”
With WWE not securing the level of rights fees increase per their new agreement with NBCUniversal, the focus on the company again points to WWE securing substantial increases in WWE Network subscription levels. Those numbers are expected to be revealed during the WWE quarterly conference calls, and will continue to be a key focal point in the WWE business structure going forward.
What do you guys think of WWE’s new deal with NBCUniversal and the negative impact it has had on WWE stock? Leave your feedback in the “Comments” section below.
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