WWE has been an openly traded company since 2000, and they have experienced a lot of highs and lows since going into this field. This past year, they seemed to have their best stock prices to date, but once WWE signed their Television deal with NBC Universal, things started to get a bit weird and go haywire for them. It seems that the WWE has been in damage control, and now they have another problem on their hands.
And Investment firm by the name of Lemelson Capital announced recently that they have taken a major stake in WWE shares. It seems with their first act as a major shareholder, they have decided to cal on WWE's Board of Directors to replace the current executive management team. You know, because they feel they are able to just walk in and demand stuff. However, they did make some points with their recent press release, saying:
Lemelson Capital Announces Stake In World Wrestling Entertainment And Calls On Board To Pursue New Management Or OwnershipWell, that escalate quickly, right?
Marlborough, MA, May 16, 2014 -- Lemelson Capital, LLC, a private investment management firm, today announced that they had taken a stake in shares of World Wrestling Entertainment (WWE) and called on the Board of Directors to replace the executive management team of the company following a period of consistent losses, execution issues and material misstatements.
Despite the stock's roughly 63% correction since Lemelson Capital's original short call less than two months ago (from $30.37 on March 17 to $11.33 as of publication of this release), the firm today also reiterated that fair value of WWE's common stock is between $8.25 and $11.88.
"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 homerun'," said Lemelson.
Lemelson Capital today also called on WWE's Board of Directors to promptly replace the company's executive management team, or explore the sale of the business, and said that such changes are a necessary component of any successful strategy going forward. "For example, promoting the WWE direct network's value to shareholders without a fair and accurate discussion of the implications to a traditional network revenue circumvented management's fiduciary responsibility as stewards of investor's capital, and is part of what has emerged as a pattern over recent years. Further, there are no pending operational developments in the pipeline to offset these significant losses.
Despite the wild success of the WWE Network, getting into a lot of American homes, it did not do the numbers WWE felt it could. WWE felt they could get over a million subscribers by WrestleMania 30, and they were not able to do so. WWE reached a rough 70% of their estimated total.
Keep in mind that WWE has yet to introduce the WWE Network overseas. So WWE could pull in major numbers once it is available to people around the world. So currently we cannot judge the product of the WWE Network. It is a great offer though, for only $10 a month you get access to thousands of hours of WWE footage and can see every WWE, WCW, and ECW PPV ever done. You also get the current WWE PPVs for free. WWE PPVs alone used to cost on cable/satellite around $50 for Americans. So Americans save hundreds per year with this just going off of PPVs.
WWE did mess up recently with their television rights deal. WWE was worth far more than they signed for and it's sad that they agreed to so little. There is not a wonder WWE's stock took a dive when they agreed to the deal. NBC got a steal with the WWE. WWE RAW alone brought in a billion dollars worth of profit in a two year span. WWE settled for $200 million a year. So WWE gets only 40% of what they earned in that time for just RAW, imagine the other shows as well. You'd think half or 60% would be better or even 50%.
The real issue here is that a random investment team is walking in and making demands to the WWE. While they have presented facts, a lot of these issues are on Vince McMahon himself. He may not be on the executive team but he calls everything himself, so if the investment firm is calling out the WWE for what they claim above then they have no right to call out the executive team as they work on the orders of the WWE Owner. WE will have to see what comes of this, but obviously WWE is not pleased with the demands by any means.
IMG Credit: Google