WWE Stock Tanks – Can You Smell What Wall Street Is Cooking?

WWE Stock Tanks – Can You Smell What Wall Street Is Cooking?

WWE stock price in May 2014 dropped to the lowest level since the company’s initial public offering. Here is what the bidnessmen think about this story

WWE’s Stock Price Tanks – Can You Smell What Wall Street Is Cooking?

By Chris Huang on May 27, 2014 at 8:33 am EST

While we are all accustomed to seeing piledrivers, DDTs, Pedigrees, and other finishing moves on World Wrestling Entertainment, Inc. (WWE), the same moves were recently used on WWE by Wall Street. WWE’s stock price took a severe beating, plummeting from $20 on May 15 to around $11 the following day. The stock was trading near $31 in March.

That’s how WWE's stock price came down

The WWE stock price getting choke-slammed wasn’t the only problem faced by the entertainment company. RAW, one of WWE’s weekly programs that brings in a lot of revenues for the company, witnessed one of its worst weeks in terms of ratings. The show only managed to attract about 3.5 million viewers, compared to its average of about four million per show.

We assume this is what WWE investors were doing

The ratings for WWE’s RAW dropped presumably because of the ongoing NBA playoffs, but also because some spoilers disclosing details of the show were circulated on the internet beforehand.

Analysts are of the view that WWE stock tanked because of two factors. Firstly, the new online subscription video service, WWE Network, failed to motivate enough people to pay for a subscription to the service. The company had been hoping that this service would make up for the loss of orders faced by the company in its pay-per-view service. The subscription fee for the new service is $9.99 per month, and the network needed anywhere from 1.3-1.4 million subscribers to make up for the losses incurred from losing pay-per-view orders.

The network only managed to get about 670,000 subscribers, which resulted in a decline in revenues. The company still maintains that it will hit the one million subscriber mark by the end of the current year.

Secondly, despite Vince McMahon trying his level best to get a better deal for his programs, he failed to negotiate the deal he wanted. His initial demand to NBCUniversal Inc. was to double the value of the existing deal between the two. If he had managed to successfully negotiate that deal with the network, it would have meant $100 million in fees for WWE. Failing to strike a deal with NBCUniversal, McMahon tried unsuccessfully to negotiate with alternate TV partners, only to end up coming back to NBCUniversal and sign a deal that analysts estimated was an increase of 50% over their previous deal. The raise, while large, fell short of what shareholders expected.

Said the shareholders

Vince McMahon, on the other hand, remained as hopeful as ever. He wrote an email in which it was stated: “There should be no confusion on Wall Street as it is extraordinary to have reached more than 660,000 WWE Network subscribers only 42 days after launch, putting us on track to reach one million subscribers by the end of the year. We feel good about nearly doubling the value of our four largest TV deals around the world."

The recent drop in the value of WWE stock also translates into McMahon losing his coveted status of being a billionaire. McMahon owns 52% of the company and the recent smackdown on WWE stock translates into him losing more than $350 million – a loss that gets him fired from being a member of the billionaire club.

Gif source, Gif source

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