So, about professional wrestling… It’s hardly immune to the vicissitudes of the business world, particularly when we’re talking about a publicly traded company ($88/share) with a market value of $6.27 billion as of last Wednesday.
We’re talking about – as most of you have probably already guessed – the WWE. They’ve been in the news a lot lately as their former CEO (and one-time Penciled Necked Geek according to Fred Blasse) Vince McMahon was attempting to come back - not unlike those of The Undertaker - and rejoin the company only months after “retiring” when a Wall Street Journal exposé claimed that he paid well over $15 million over 16 years to suppress allegations of sexual misconduct.
The announcement of his return on January 8 was greeted by this from SB Nation:
Vince McMahon Ruins Everything
Time will tell on that headline but there’s no question McMahon’s return has complicated things at WWE headquarters in Stamford Connecticut. Greatly. He returned as executive chairman, his daughter, Stephanie, remains as co-CEO. Within hours of his return, three directors were fired and two resigned.
McMahon returns while still dogged by more sexual misconduct allegations and only weeks after red flags were raised at the SEC over the news released by the WWE that McMahon used roughly $20 million of WWE funds to make the payments and pay legal bills.
McMahon, by the way, owns 80% of WWE’s voting stock and 51% of the company. This may account for his sudden return.
Here is [one of] the problem(s) in a nutshell: McMahon’s last months as the CEO (some people would say years) were marked by the Wall Street Journal revelations, drooping viewership, and a “TV product designed to appease one man and one man only, no matter how zany, or out of touch his ideas in booking philosophy had become.” (Forbes 1/9).
WWE may be a NYSE listed company, but – like Waystar RoyCo in Succession – it was a one-man show and that one man was toxic. No further proof is needed beyond this: when McMahon stepped down his son-in-law, Paul Levesque, otherwise known as Triple H, took over WWE’s creative side. The product took off. Four months onto Triple H’s creative changes, WWE stock shot up over 50%.
That now is threatened by McMahon’s return – a returned no one in the company apparently wanted. The reason for SB Nation’s headline is a fear shared by shareholders, staff, and entertainers alike - that McMahon will insist on taking over the creative side once again and pitch Triple H over the top rope.
The only people happy his return all work for the AEW – WWE’s new competition, already with TV ties.
McMahon says he “returned only to facilitate potential sales talks” before WWE’s TV media contracts need to be renegotiated in late Spring.
A potential shareholder perfect storm is brewing. McMahon, of course, has to approve any sale. If he takes over the creative side he will start losing viewership and probably much of the talent – they were never happy under his leadership over the last decade – and the stock will slide. The stock goes down, the sales price goes down. Viewership goes down, the value of the TV contracts drops. The stock price goes down with the lower TV contracts. Then the sale price of WWE goes down as does McMahon’s profits. The sale price goes down too far, McMahon may not approve the sale. He stays in control and this whole vicious cycle repeats itself.
Where are the shareholders through this? Along for the ride. McMahon owes them the fiduciary duty to act in the best interests of the company. He could undercut himself by taking the creative side back and gutting the product. If he does, at what point do the shareholders hold him accountable?
One thing about McMahon and the WWE – it’s never boring. We’ll keep watching, look for an update sometime in April.
