WWE chief loses $350 million in a day
Vince McMahon is no longer a billionaire after the company signed a new television deal that disappointed investors.
Shares didn't improve on Monday, closing at $10.96.
The stock fell after news that WWE had signed a new television deal with NBCUniversal for less than some investors had hoped. Benchmark analyst Mike Hickey estimated WWE got a 50 percent raise over its last TV agreement, but he expected the new deal to pay WWE double or triple its previous one.
"The company's valuation could take a heavy beating this morning, as the new domestic TV deal with NBCUniversal likely disappointed investors," he wrote in a report downgrading the price target for the company's stock from $29.12 to $19.96.
WWE executives kept an even tone but offered little additional guidance. "We never commented publicly on the expectation," said George Barrios, chief strategy and financial officer. "We said we were undervalued by the math that we had done."
The new TV deal hit at a turbulent time for WWE and McMahon (pictured). The company's shares shot up 89 percent in the first three months of 2014, and McMahon's net worth peaked in mid-March at $1.6 billion.
But shares dropped 29 percent the week after WWE announced its new online streaming network had only 667,000 subscribers, taking a $325 million chunk out of McMahon's fortune. He remained a billionaire until Friday morning.
Some investors saw the trouble coming. Intrepid Capital Management, once WWE's largest outside investor, sold its 10 percent stake in January. Intrepid's Jayme Wiggins told Forbes in a feature story on McMahon that he thought the billionaire was getting too excited about his new online streaming network.
That concern remains, but Wiggins now has additional questions after reading the company's financial projections provided in the news release about the TV deal. The online streaming network should break even when it has 1.5 million subscribers, according to Wiggins, but WWE said its operating income will be just $40-$60 million at that point -- even with new TV deals that will add $90 million to the company's revenue.
"The question is why their numbers are so low given this renewal," Wiggins said. "With the information that they put out there, it seems to imply that their core business isn't making money."
It is possible that the TV deals have a steep escalation in later years, Wiggins cautioned, so WWE might not be getting $90 million a year by the time it reaches 1.5 million subscribers on the online network, which could account for the underwhelming projections.
"If that's at play here, it could kind of mitigate all of this bearishness that’s happening today," Wiggins said. "There is definitely some confusion here, which is why you're seeing the stock drop."
Barrios offered little to clear up the confusion. "I don't want to talk about the specifics of how the contracts are structured," he said. "I think it's pretty typical that there is some escalation in them, but we haven't gone into detail on any of that."
Cutting TV deals is how McMahon built such a massive fortune in the first place. He got his start in 1972 working for his father's small, regional wrestling promotions company. Ten years later, he bought out his father and set about taking WWE national.
He used pay-per-view to jack up revenues and reach a national audience, making stars out of wrestlers like Hulk Hogan and turning himself into a TV personality in his own right. With TV numbers growing, attendance at live performances blew up.
McMahon became a billionaire for the first time in 2000, still holding onto a huge stake in the company. But WWE stock dropped a year later and didn't recover that ground until January of this year, about 13 years or so later, when McMahon -- who owns 52 percent today --rejoined the billionaire ranks. Now he's down and out once again.
More from Forbes
The WWE is built upon a pile of dead bodies of the "wrestlers" who have died from blatant steroid, growth hormone and meth usage. I am surprised it has lasted this long. The entire mess should be shut down by the FDA & DEA if they had any balls.
When guys like the Warrior die of heart attacks in their 50's it's obvious why. Vince looks like he is 75 years old because he takes the juice too. One day, he will follow his employees into an early grave.
In situations like this, you have to ask yourself, "What would Randy "The Macho Man" Savage say about this situation?? Randy would have said: "OOOOOOOOOOhhhhhhhhh YahHHHHHHHHH!!"
The 667K that are paying for the new streaming network are the hardcore fans who still think wrestling is real. I have my doubts they will ever reach 1.5 mil in subscribers. Their product is starting to reach a plateau and is getting stale. Whoever is writing the scripts needs to be fired. All you have to do is watch the opening of the show and you can accurately guess what is going to happen for the next 3 hours.
I can't watch most of their current crop of wrestlers. When certain wrestlers, like the Wyatt family come on, I change the channel. There are too many others to name individually that also make me watch something else on TV. Out of the 3 hours of the Monday show, I probably only watch about a total of 30 minutes and that is only in 2 or 3 minute segments at a time. I don't even bother to watch any of their other shows and I used to be a die hard fan who enjoyed the product.
All they have now are people who have some skills on the microphone, but they don't have the showmen like Hulk Hogan, Rick Flair, Rowdy Roddy Piper, etc.
Despite what the article says, don't worry about Vince. He will have enough money to live the lifestyle he has become accustomed to. They can put out an average product that most die hard fans will buy into, but they have lost people like me, who enjoyed what wrestling used to be.
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