World Wrestling Entertainment Inc. (WWE, Financial) is dealing with immense upheaval, and there doesn't seem to be any immediate signs of the turbulence calming down.
Last year, the entertainment conglomerate was struck with a scandal that rocked it to its core. The longtime chief of WWE had to leave his position in response to scandalous media reports. Markets reacted positively when Vince McMahon resigned, and Stephanie McMahon and Nick Khan became co-CEOs. In addition, Paul Levesque, better known by his ring name Triple H, took the helm as talent relations executive vice president. All of these individuals came to these roles with a wealth of experience, and business went on as usual.
However, the new year brought about a dramatic turn of events for the world's largest pro-wrestling company. Vince McMahon staged a comeback at WWE mere months after the scandal broke that forced him out. Despite relinquishing his role as CEO, Vince McMahon still has considerable voting control over the organization due to his status as majority shareholder. As reported in the November filing, WWE stated that Vince McMahon's influence gives him control over the entertainment giant's affairs. Now, he is back on the board as executive chairman at a key moment in the company's history.
Media rights are the main source of revenue for the WWE, and Vince McMahon rejoining the board comes at a critical juncture. Talks regarding television rights deals for WWE will likely start this year since its TV contracts with Comcast's (CMCSA, Financial) NBCUniversal and Fox (FOX, Financial) will end in 2024.
In addition, reports are swirling that Saudi Arabia's Public Investment Fund has struck a deal with the WWE to make a purchase and then subsequently take it private. If a take-private deal takes place, it will mean several things for WWE and its shareholders, though most scenarios are positive.
Put all your cards on the table
For many years, WWE has reigned supreme in the pro wrestling world. Due to its preeminent position and solid fanbase, investors flocked to WWE stock, which is why shares remained a lucrative investment despite tremendous economic turbulence during these times.
However, the company's future has been thrown into doubt by a combination of factors brought to a head by the impending need to re-negotiate television rights. Who will get to offer WWE's content? Will the company join the plethora of other streaming services on the market, or will it keep its focus on its more lucrative content niche? Will it sell itself to anothre company, or be taken private?
It seems that with Vince McMahon back on the board, he is calling the shots, while his daughter Stephanie McMahon has resigned as co-CEO. This level of control means it's hard to tell what route the company will take in the end. WWE's diverse business activity encompasses media, live events and consumer product services. But its main bread and butter remains media rights. That is where the bulk of the company's revenue comes from. Vince McMahon argued that he had to be at the helm of affairs before the decision for media rights was made.
Possible sale is in the works
Vince McMahon has not expressed any desire to part with the company. However, upon his reinstatement to the board of directors, he declared that it was essential for him to participate in their discussions regarding TV rights negotiations. In addition, rumors are swirling about a possible sale of the WWE brand to the Saudi Arabia Public Investment Fund.
In recent years, Saudi Arabia has made substantial investments in sports teams and leagues. Consequently, the possibility of a WWE purchase is not off the table. However, if and when that occurs is up in the air. A partnership between the two entities could greatly impact the Saudi Arabia Public Investment Fund's portfolio. However, nothing has been confirmed as of yet.
If a take-private transaction does occur, it could be a bonanza for WWE shareholders. A take-private transaction is when a private equity company acquires the shares of a publicly traded organization. Private companies may buy out their shareholders and withdraw from stock exchanges. When this occurs, shareholders are generally offered a better price than their stock's current market value. It is no wonder WWE stock is up more than 30% this year in anticipation of a possible deal.
Takeaway
The world of professional wrestling has come a long way, with the WWE at the forefront. Professional wrestling is more popular than ever, from major events like WrestleMania to smaller shows on the independent circuit. With new technology and innovations, WWE has brought its fans even closer to the action and created exciting new storylines. The future looks bright for WWE fans as they anticipate what's next from this ever-evolving entertainment juggernaut.
No matter what happens to WWE as a company in the coming months, one thing is certain in my opinion - WWE shareholders have a high chance to benefit. The content profile give a strong base for negotiations, a take-private deal is possible and even a sale to a larger media company is not out of the question.
