WWE refutes allegations of wrongdoing in class action lawsuit
By Simon Ward
World Wrestling Entertainment is challenging the claims of unlawful conduct by executives made in a probe being undertaken by a law firm on behalf of investors in the USA-based professional series, insisting they are based on “false and incorrect gossip.”
Pomerantz LLP announced this week that it was investigating “whether WWE and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.”
The firm, which has offices in New York, Chicago, Los Angeles and Paris, claims to represent WWE investors concerned at the plight of the business in the past year, and has appealed to others to get in contact.
Earlier this month, Pomerantz launched a class action lawsuit against WWE and certain officers in New York seeking damages on behalf of shareholders that lost money between 7 February, 2019 and 5 February, 2020.
Other law firms Vincent Wong and Robbins Geller Rudman & Dowd have begun similar proceedings, and Levi & Korsinsky last month announced an investigation into “possible violations of federal securities laws" at WWE.
The class actions cite “disappointing financial results” over the past year and the failure to secure a lucrative broadcasting deal in Saudi Arabia, as well as the departure this January of co-presidents George Barrios and Michelle Wilson.
WWE shares have fallen by more than 40 per cent since December, and Bloomberg reported this week that owner Vince McMahon had sold a 15-per-cent stake, amounting to 2.26 million shares, in a deal with Morgan Stanley, which frees up more than $80 million in liquidity while enabling him to retain control of the business.
The series has denied the allegations of fraud and unlawful conduct outlined by Pomerantz, saying in a statement to Sportcal: “Although WWE has not been served, the company’s outside counsel, Jerry McDevitt of K&L Gates, has reviewed the complaint, which is based on false and incorrect gossip from unnamed sources, and will move to dismiss the case as it is meritless.”
The law firm did not elaborate on the accusations, but the statement issued this week by Vincent Wong alluded to an alleged “fraudulent scheme” in which the price of WWE stock was said to have been artificially inflated.
WWE reported a record $960.4 million in turnover for 2019, representing an increase of 3 per cent from the previous year, while fourth-quarter revenue came to $322.8 million, up 18 per cent from the same period in 2018.
However, the overall figure was less than the series expected with Frank Riddick, the interim chief financial officer, citing the lack of a media rights agreement in the Middle East as a major factor.
For each of the first three quarters of 2019, WWE posted lower revenue than for the previous year.
The series has been looking to secure a broadcasting deal with the Saudi government, as rights to the series in the Middle East and North Africa have been held by regional broadcaster OSN, which shut down its sports channels last year.
There is now the further complication of the coronavirus pandemic although WWE stressed this month that it had over $500 million in available cash and debt capacity as it prepared itself for the “material” impact the emergency will have on its business.
Despite the pandemic, WWE is still planning to go ahead with several shows, including WrestleMania 36 in Florida on 4 and 5 April, although this will now take place behind closed doors.
The pay-per-view TV event, which is also available on series' own subscription platform WWE Network, was originally earmarked for the 65,000-capacity Raymond James Stadium in Tampa, but has been moved to the WWE Performance Center in Orlando.
With the sale of WWE shares for a price of $38 each this week, McMahon owns around a third of the company, but retains just over 70 per cent of the voting rights.
His focus has been divided this year by the relaunch of the XFL, the USA-based American football league, although the remainder of the 2020 season has been cancelled because of the coronavirus outbreak.
The previous edition, backed by McMahon, ran for just one campaign in 2001.