A New Lawsuit Has Been Brought Against WWE By Its Stockholders

A new lawsuit has been brought against WWE by its stockholders. The latest edition of the Wrestling Observer Newsletter reports that Robbins Arroyo LLP, a shareholders rights law firm, filed suit against WWE on July 25 in a U.S. District Court of Connecticut on behalf of all people who purchased WWE stock between Oct. 31, 2013, and May 18, 2014.

Dave Meltzer of the Wrestling Observer describes the lawsuit,

The lawsuit accuses WWE of making false and misleading statements concerning the company’s ability to double its U.S. television rights. They certainly strongly hinted at it, forever citing the NASCAR television deal and comparisons of WWE ratings to NASCAR ratings, which were similar. Vince McMahon also told an investor at a conference when he suggested that the U.S. television rights could double, Vince said to Brad Safalow on a conference call that “If we don’t double, I’ll let you put me in a hammerlock.”

There were no guarantees stated, but based on how he said it, he was talking about far more than doubling, as if doubling would be well under expectations. The complaint alleges that during that period, WWE officers issued materially false and misleading statements in filings, press releases and conference calls regarding their ability to double their U.S. television licensing agreements. In 2013, WWE took in $106 million in U.S. television revenue, a number that also included Main Event (since canceled by Ion and put on the network) and several months of Saturday Morning Slam (canceled by CW), as well as Total Divas.

The new deal is estimated at being at $132 million for the 2014-15 season for Raw & Smackdown. That doesn’t include Total Divas, which, if two seasons air this year, would up the total by around $10 million. But there is no guarantee Total Divas will have two seasons in 2014-15, as shows like that usually don’t have a long shelf life, even though Total Divas has done well in the ratings so far and appears to have some legs left. The lawsuit stated that WWE, when presenting ratings comparisons with NASCAR and the NBA, never mentioned advertisers pay far less for WWE television spots and thus, even with similar ratings, the value of the programming to stations isn’t there.

They also claimed WWE never told its stockholders that the launch of the WWE Network would hurt them in television negotiations. That is true, nobody ever said that beforehand that the launch could impact talks. I was surprised Vince McMahon outright said after the new deal came in and the stock price dropped so hard, that the launch of the network did hurt them in negotiations. People who purchased stock during that period have 60 days from 7/25 to join into the lawsuit. They also provided an 800-350-6003 number for such stockholders.

While no one knows what will come of the suit, it is noted that the stockholders do have a case and it will be interesting to see what happens from here. Various law firm investigations have been issued against the company over the last 3 months since WWE’s new television deal with NBCUniversal was announced. The deal was significantly less than WWE projected it to be, causing many shareholders to claim fraud against the company, and that they were misleading the stockholders.

Editor’s Note:
Wow. I wonder what this settlement is going to look like and how it will affect the amount of money the company loses this year.