WWE Accused of Misleading Investors, Saudi Arabia Relationship Questioned In New Lawsuits

Several new class action lawsuits being brought against some of the top management in WWE are questioning the relationship that the company has had with Saudi Arabia over the last couple of years, as well as how honest the company has been with investors as it relates to declining numbers in various aspects of the business. Investment firms Levi & Korsinsky, Glancy Prongay & Murray, Kessler Topaz Meltzer & Check, and Ryan Merholz & Melvyn Klein have alleged wrongdoings in class action suits that name Vince McMahon, Paul (Triple H) Levesque, Stephanie McMahon, and several other major executives at WWE, including former WWE Co-President George Barrios.

The Levi & Korsinky lawsuit alleges that WWE "deceived the investing public" in numerous reports that were issued. In a press release by the firm, they claim that WWE "made materially false and/or misleading statements and/or failed to disclose that: Defendants perpetrated a fraudulent scheme which: (i) deceived the investing public regarding WWE's business and prospects; (ii) artificially inflated the price of WWE Class A common stock; (iii) permitted certain senior executives of WWE to sell more than $282 million worth of their personally held shares at fraud inflated prices; and (iv) caused the public to purchase WWE Class A common stock at artificially inflated prices." (via Forbes)

The Ryan Merholz & Melvyn Klein filing questions WWE's relationship with the Kingdom of Saudi Arabia. They specifically mention the situation that happened last year when several WWE personnel had difficulty returning from a show in the Kingdom.

“WWE held the Crown Jewel live event in Riyadh, Saudi Arabia. After the event ended, shocking news reports surfaced claiming that the Saudi government was effectively holding a number of WWE wrestlers ‘hostage’ in retaliation for McMahon's decision to delay a live broadcast of Crown Jewel until the Saudis made tens of millions of dollars in past due payments. Estimates for the amount outstanding ranged from $60 million to as much as $500 million. Several wrestlers detailed their experience during the ordeal on social media platforms.”

WWE has not yet publicly commented on the allegations of any wrongdoing as it relates to their Saudi Arabia arrangement as alleged in the lawsuit.

While WWE's bottom line has remained solid in these hard times, as detailed during their investor call last week, largely due to their massive television contracts, the WWE stock price has declined quite a bit over the last couple of years, as have their television ratings. The lawsuit from Glancy Prongay & Murray alleges that WWE hasn't been honest with investors as it relates to the causes of the declines in these areas. They specifically mention WWE misleading shareholders by attributing their decreasing live event attendance and declines in the product overall to injured talent, even as top names like Roman Reigns and Kevin Owens returned to action.

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Part of that legal filing reads:

“On April 25, 2019, WWE reported that for first quarter 2019, revenue declined year-over-year, notably in the live events and consumer products segments. Though the Company attributed the decline to the absence of certain “Super Stars,” several analysts connected the results to difficulties securing a media rights deal for the Middle East and North Africa (“MENA”) region with the Kingdom of Saudi Arabia.

On this news, the Company’s share price fell $13.12 per share, or over 13%, to close at $85.38 per share on April 25, 2019, thereby injuring investors.

Then, on October 31, 2019, in connection with the Company’s third quarter 2019 financial results, WWE lowered its fiscal 2019 adjusted OIBDA guidance to a range of $180 million to $190 million, stating that “no assurances” could be made that a media rights deal for the MENA region would ever be completed.”

WWE attorney Jerry McDevitt will no doubt vigorously defend the company from all of the allegations above. We will provide updates on the situations as they become available.

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