​A Private Investment Firm Buys Stake In WWE – Details


UPDATE x 7: A private investment firm is making
a move on WWE following their hefty stock drop today. Seeking Alpha reports that
Lemelson Capital, LLC announced that they had purchased a stake in the company
and were calling on the Board of Directors to replace the current executive
management team due to “a period of consistent losses, execution issues
and material misstatements.”

The firm shorted the stock two months ago and reiterated that fair
value of WWE’s common stock is between $8.25 and $11.88 with with the current
executive management team in place. They said in the statement, “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. 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

UPDATE x 6: WWE stock closed Friday at $11.33,
down $8.66 (43.45%). The stock is now back to the levels it was at around
mid-October of last year. The stock surged over the last few months on
anticipation of WWE Network subscriber numbers and a big new TV deal, and now
that those two did not deliver the numbers Wall Street and WWE (internally)
expected, the stock has tumbled back down to what it was well before
anticipation/speculation over those two things began. It should be noted that
WWE still has a bit of room before it revisits its 52-week low, which was

The TV deal can’t change now and pay-per-view revenue will likely
continue to decrease every quarter, so WWE will be under even more pressure
going forward to pump up revenue from WWE Network and increase the subscriber

WWE will hold an “emergency” conference call on Monday to address
the company’s outlook. Vince McMahon, who lost roughly $340 million today due to
the stock drop, will take part in that call. As noted earlier, the call on
Monday shows you how worried WWE is about their stock plummeting as they are
going to have Vince McMahon speak on it ASAP to try and calm down their
investors. Basically, they are in “panic mode.

UPDATE x 5: As of 1:52PM ET, the WWE stock is
trading at $11.28. This is down $8.65 from yesterday, representing a 43.4%

UPDATE x 4: As of 12:59 PM ET, the WWE stock is
trading at $11.32. This is down $8.61 from yesterday, representing a 43.2%

UPDATE x 3: As of 11:50 AM ET, the WWE stock is
trading at $11.36. That is down $8.57, and 42.9% overall.

UPDATE x 2: As of 10:50 AM ET, the WWE stock
has rebounded a little bit. The stock is at is at $11.54, which is down a total
of $8.40 (42.14%).

UPDATE: WWE stock closed yesterday at $19.93
and when the announcement was made about the new TV deal after the market
closed, the stock dropped around $4 almost immediately. As of 9:50 AM ET, the
stock is sitting at $10.75, which is down 46.01%. The company got around a 25%
increase in TV rights fees, which on the surface sounds good, but the company
continually stated that they were aiming to at least double the rights fees.

Following the launch of the Network and various reports of the TV
deal and “a rumored sale of the company” the stock hit $30.

ORIGINAL: Earlier today, WWE and NBC/Universal
announced a new multi-year deal for RAW and SmackDown to continue airing on USA
Network and SyFy. The press release did not note the length of the contract, the
terms of the deal or whether SmackDown will stay on Fridays or go live. It is
worth mentioning that SmackDown is referred to as “Friday Night Smackdown”
although that is the full name of the show on SyFy, so it doesn’t preclude the
possibility of it going live.

The agreement also notes that Total Divas will continue to air on
E!, which isn’t a surprise.

Vince McMahon said of the deal, “We are proud to continue
our long-standing partnership with NBC/Universal given their premiere position
in the marketplace and vast promotional platforms. We are excited about our
future as we further the reach and popularity of our live, family-friendly
entertainment programming 52 weeks a year.”

The press release was light on details and doesn’t answer whether
RAW and SmackDown will get earlier debuts on the WWE Network, which was one of
the last sticking points in negotiations.

More information will surely filter out, but as of now WWE is
officially set to continue on their current networks for the next several

With that being said, WWE’s stock PLUNGED
following the announcement of their deal with NBC/Universal. The stock closed at
$19.93, which was up 3%, but was down $4.24 (down a HUGE 21%)
in after-hours trading. The reason for this is the announcement that the new
deal will be for $200 million, which is contrary to Vince McMahon’s statement on
last year’s earnings call that they expected to at least double the value of
their TV deal. Last year’s numbers were about $160 million.;

You can see the full financial details in a press release here. The company is using a bit
of wordsmithing (which may be perfectly reasonable) in the release, noting that
the $200 million number is “representing an increase of more than $90
million, that is nearly three times the increase achieved in the previous round
of negotiations.”

The release also notes that there are about 77 million broadband
homes between the US and certain international markets that “have an affinity”
for WWE content and that based on the percentage of homes who have signed up for
the WWE Network, they should have between 2.5 million and 3.8 million
subscribers. They estimate that 1.3 million to 1.4 million subscribes will be
required for the network to offset the “complete cannibalization of the
company’s Pay-Per-View and SVOD businesses” as it would generate about $40
million, on par with the company’s Pay-Per-View and SVOD businesses in 2012.

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