[ad_1]
Michelle Farsi/Zuffa LLC
WWE continues to deal with the fallout from sexual abuse allegations faced by its former boss Vince McMahon, and shares of parent company TKO Group Holdings are falling as investors weigh the potential downsides.
TKO shares fell 4.4% on Monday with nearly double their normal trading volume, closing at $82.73. The stock is well below the level at which it began trading last September following WWE’s merger with the UFC into a new public entity controlled by Endeavor Group Holdings. A prominent Wall Street firm earlier Monday flagged “legal and brand risk” to the TKO from the lawsuit filed against McMahon and former WWE talent chief John Laurinaitis by former employee Janel Grant, who offered graphic details when filing accusations of sex trafficking, assault and rape. . McMahon, who in 2022 revealed paying more than $12 million to multiple women to settle other allegations of sexual misconduct, has denied Grant’s claims.
Speaking to reporters after WWE’s Royal Rumble event, chief content officer Paul Levesque, a former wrestler known as “Triple H,” raised some eyebrows by seemingly ignoring the controversy. “Yes, there is a negative,” the executive admitted at a news conference Saturday night, but “I choose to focus on the positive.” A long-term deal with Netflix, the appointment of Dwayne Johnson to the TKO board of directors and a sellout in Florida for the Royal Rumble all added up to “an incredible week,” Leveque said. “I don’t even want to get bogged down in the negatives. I just want to focus on the positives and where we are going. We are in the most exciting time of the year for us. “We are at the most exciting point for me, business-wise, that we have ever been.”
When asked by a reporter if he had read Grant’s legal complaint, Leveque said he had not. When another reporter asked him what was being done at WWE to ensure that his managers weren’t taking advantage of employees, Leveque responded: “I’ll give you the most generalized answer I can: as much as possible. That is something very important for us, a very important issue for us.”
Wall Street analyst Robert Fishman of research firm MoffettNathanson issued a report on Monday initiating coverage of TKO with a “neutral” rating on its stock. Vince McMahon, Fishman noted, made WWE what it is today, guiding it in and out of the ring for decades and taking it from a fringe regional attraction to a global media power. He is also TKO’s largest individual shareholder, and Fishman believes the lawsuit poses “incremental legal and brand risks” to TKO.
“Your long-term intentions with your financial interests in TKO must be considered as a shareholder,” Fishman wrote. Under last year’s WWE and UFC merger, McMahon ended up with about 35% of TKO’s Class A shares and 15% of the company’s total financial interest. Late last year, he sold about $700 million in stock, reducing his Class A stake to about 25% and his share of the company’s total interest to 10%. McMahon’s need to mount a legal defense could mean tapping into more capital. “McMahon’s continued sales could put downward pressure on TKO stock,” Fishman wrote, noting the 6% drop in TKO’s stock price after McMahon’s recent stock sale.
The company also acknowledged the potential liability it incurred in choosing to welcome back McMahon, who resigned as WWE chairman and CEO after previous payments to the women were revealed. His status as a member of TKO’s board of directors “could have adverse financial and operational impacts on our business,” the company warned in an SEC filing last fall. “Sir. McMahon’s membership on our board could expose us to negative publicity,” the filing continued, and “may result in additional scrutiny or otherwise exacerbate the other risks described herein. Any of these results could have, directly or indirectly, adverse financial and operational impacts on our business.”
Dave Meltzer, editor of the Wrestling Observer Newsletter and a prominent figure in wrestling circles, expressed criticism Monday of Levesque’s comments at the Royal Rumble. He noted that the executive is married to Stephanie McMahon, a former member of the WWE management team and also the daughter of Vince McMahon. “His father-in-law was just accused of sex trafficking and rape,” Meltzer wrote on X, formerly Twitter. “Everyone knows how much I like Paul personally, but this was bad. The most powerful man in the history of the business has just been ousted in disgrace. “This was really bad.”